RISI

India's incredible farm forestry program

By Bob Flynn Mon, Nov 19, 2012
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BRUSSELS, Nov. 20, 2012 (RISI) -Sometime in October, 2012, a farmer in the northeastern corner of Andhra Pradesh state in India will plant a very special sapling. From the farmer's point of view there may be nothing unique about this sapling, which will look like thousands of other casuarina trees he has planted in order to supplement his income. However, this sapling is special, because according to Andhra Pradesh Paper Mills (APPM) it will be the one-billionth sapling produced for farmers by the company as part of its long-running farm forestry program. APPM, which was acquired by International Paper in 2011, has been providing saplings for farmers since 1989, and estimates that cumulative plantings of its saplings has covered more than 150,000 hectares and has provided more than 75 million man-days of employment. All this planting, along with work by other companies, has created a wood basket belt along the northern coast of Andhra Pradesh that has not only provided wood for APPM's pulp mill in Rajahmundry but has also drawn in pulp producers from Maharashtra, Orissa, Gujarat, Karnataka and even other north Indian states seeking wood supplies.

J.K. Jain, Sr. VP of Purchasing and Forestry, APPM (left) and Bob Flynn, Director International Timber, RISI, in a 3-year old plantation of clonal casuarina in Andhra Pradesh

Why the need for this type of farm forestry program? Simply put, India has a serious deficit in wood supply. Attend any gathering of paper companies or wood panel producers in India, and the topic quickly turns to the serious shortage of raw materials. Companies are not permitted to own land in any significant amount, so cannot develop their own company plantations, as in Brazil and other countries. The designated forests in India, managed by the government, are primarily focused on conservation and production of non-timber values, and an estimated 85-90% of the country's industrial wood supply is now coming from private lands (in India's forest survey, these are classified as "Trees Outside of Forests"). And India's demand for pulp and paper is growing rapidly. RISI forecasts that production of graphic papers in India will increase by 3.8 million tonnes between 2011 and 2025, while production of packaging grades will increase by 6.5 million tonnes over the same time period. While a significant portion of this increase will be fueled by recovered paper, demand for virgin pulp and hence for wood will also be rising quickly. Whether India meets this need with greater imports of pulp and paper, or through more domestic production, will depend on the success of farm forestry programs like those of APPM.

Prior to 1975, APPM primarily relied on bamboo from state-owned forests as its raw material. When a shortage of this fiber became evident in the early 1980s, the government sold additional volumes of mixed hardwoods to supplement supplies, but even this was not enough, so the company initiated its farm forestry program in 1989.

The saplings are not given away to the farmers, but are provided by APPM at a highly subsidized cost. "Companies learned very early that if they simply gave trees to farmers, then these had no value, the farmers didn't take care and survival was not good," says J.K. Jain, APPM's Senior VP of Purchasing and Forestry in India. "But once we started charging even a very small amount, tree care improved and survival greatly increased." Companies have tried various strategies in designing farm forestry programs around the world, from paying annual land rent, to sharing harvest volumes, using different types of contracts, etc. APPM opted for a simpler approach. "We supply the saplings to the farmer," says Jain. "We provide advice on how to prepare the site, how many saplings to plant per hectare, and other practices. But the trees belong to the farmer, 100%. We hope he sells the wood to us, but of course we have no control over who they sell the wood to." And, at the risk of sounding like a cheerleader for the free market system, this is a simple structure that by all appearances is working quite well, as both sides have a vested interest in helping the other succeed. To date, some 45,000 farmers have participated in this program, which operates without any type of government subsidy.

Log truck being loaded at wood depot in Andhra Pradesh, for transport to APPM (IP) mill. Note small diameter wood, typical in India, but casuarina wood is pulped with bark

From the farmer's point of view, why should he plant casuarina trees? This species grows well in very sandy soils along the coast, soils which are often non-productive for food crops. In addition, farmers have found that the income from growing casuarina is greater than what they were earning on other marginal or degraded farm lands. This species is also a nitrogen fixer, another plus. And the rotations are short enough (typically four years) that they fit the farmer's objectives for cash flow. Larger stems are sold as construction poles, smaller stems for pulpwood, the branches for local fuelwood and even the stumps are dug up and used as high-calorific fuel for making bricks.

From the company's point of view, developing this farm forestry program seemed like the only sustainable way of building its business. APPM's pulp and paper facility in Rajahmundry and Kadiam have an annual capacity of about 240,000 tonnes, and currently is consuming about 700,000 green tonnes of wood per annum. The mill is only about 60 km from Kakinada port, and could theoretically import woodchips, although the company judged that this would be expensive and unreliable. Helping the farmers develop tree plantations not only ensures a more stable wood supply, but helps to create jobs and improve livelihoods in the region. While APPM would of course like to buy wood for the lowest price possible, if the company tries to push down prices too far, the farmers will simply sell the wood to others and/or will stop replanting and supplies will dry up.

Driving around the country outside of Visakhapatnam, one is struck by the large number of casuarina plantings, typically in small lots of one hectare or less, often in clumps behind houses or along the edge of crop fields. I was also impressed by the large number of new homes being built in the villages where casuarina planting was most common, which seemed to be a pretty concrete indication of improving incomes.

But could APPM's farm forestry program perhaps become too successful? Rampraveen Swaminathan, International Paper's managing director and CEO in India, says the company is aware that it is trying to increase the wood supply, but without turning the region into one vast casuarina plantation. There is the social/environmental perception of perhaps having too much planted to a single crop, but also the danger that wood supply could grow much faster than industrial demand, leading to a drop in prices and subsequent disenchantment by farmers. "This is why we are rolling out the clonal propagation program as rapidly as possible," says Swaminathan. "Our clones will allow farmers to grow more wood, on a smaller area." APPM only produced 1.0 million clones in 2011, but will have produced 12 million clones in 2012 by year end, and by 2014 will be producing 40 million clones per year.

J.K. Jain says that the clonal program is just the natural progression in improving yields for farmers that has been going on for more than 20 years. "We started with conventional bare root trees that produced about 50 tonnes/ha in a four year rotation. Through our tree breeding program and use of bagged seedlings in the nursery, we increased yields to 75 tonnes/ha, but more recently have shifted to a transplant treated bare root program that has greatly reduced costs and improved yields to 80 tonnes per hectare. But the clonal program is where we will really see the gains take off. Conservatively, we are estimating an average of 165 tonnes/ha in a four-year rotation, which is equivalent to average yields for eucalyptus in Brazil." Jain says that APPM only charges 1/50th of a rupee per tree for bare root stock, which is less than the company's costs, but plans to cover its costs on clones by charging R1/ tree. "We've actually been able to reduce costs of clone production by about 60% since we started," says Jain, "And we hope to continue making improvements." To produce its 135 million bare root seedlings in 2012, APPM uses a clever system of about 40 small nurseries scattered throughout its wood sourcing area. Clones are produced at four propagation centers.

Even though the clones are much more expensive for the farmers than the bare root seedlings, Jain is convinced that farmers will quickly grasp the economic benefits of the much higher growth rates, and concentrating the growth on larger, straighter, more valuable stems. His calculations clearly show the benefits, but I was more impressed by an unrehearsed incident at one stop we made at my request, to photograph two tractors preparing ground for replanting. The farmer quickly came over to our vehicle, and the first words out of his mouth were (as translated for me) "When can I get some of your clones? I saw them planted over by the (local) wood depot." Jain says that even if wood supply growth outstrips industry demand at some periods, and prices decline, the greater yields from clones will mean higher income per hectare, which is the farmer's benchmark. APPM is also encouraging the use of intercropping in casuarina plantations with crops like ground nuts, sweet potatoes, gram, tomatoes, chilis, and lady fingers (what I call okra). "Some farmers can recover their full planting costs in the first year with intercropping," says Jain, "and of course our hope is that by helping the farmers to increase their income it will generate even more interest in tree planting."

APPM's contributions to the local society are not limited to improving incomes through developing faster growing trees and improving forestry practices. The company has provided assistance to local schools (furniture, school bags, fans, etc.). In addition, it has donated mobile medical vans and installed hand pumps for water in numerous villages. I also had a chance to see the new check dam that the company constructed in Mamidilova village and dedicated in August of this year. The dam ensures more even distribution of water through the year for the villagers, and according to the company experts should help to recharge the water table. "There are a lot of seasonal rivers in Andhra Pradesh," says CEO Swaminathan, "and a lot of opportunities to develop similar projects." This project was not simply a CSR effort, says Jain. "We estimate that this project will allow fuller utilization of the area for casuarina planting, and we expect yields to increase from 20,000 tonnes per rotation before the check dam to 70,000 tonnes per rotation with the improved water supply and deployment of genetically superior planting material." Rather than seeing social responsibility efforts as just another "cost of doing business" in emerging economies, APPM seems to fully understand that what is good for the farmers is also good for the company, and vice-versa. And the company hopes to work with others to spread this view of true economic sustainability. "This wood supply issue is not just a company problem," says Swaminathan, "It is an industry problem, a national problem. We think India's capability to increase self-sufficiency in wood supply has a great potential, and we hope to be an active part of that effort."

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