The biggest difficulty in India to set up new wood-based panel plants is of course the barriers set by the government. There is a lot of red tape, a lot of licenses required, and a lot of restrictions because of certain rulings of the Supreme Court which prevent industries being installed in certain areas close to natural forests. Then you need to have licenses from the Central Government as well as licenses from the State Government and various other government bodies. There are very stringent pollution policies, raw material policies.
Getting more specific to the installation of plants, one of the big obstacles for Indian industry is a lack of technology and expertise within the country. There are not a lot of indigenous machine manufacturers, technology providers or for that matter, even consultants. We are still running very conventional and outdated technology. If you want to be innovative in your product offering and if you want to increase efficiency and reduce your costs to be competitive with foreign products easily available in the market, you still have to go abroad to find that technology.
Another very big difficulty is the finance cost in India is very high. We pay 13 or 14 % per annum which results in a very high interest cost and reduces our operating efficiency. One of the biggest obstacles is securing raw material. Due to the blanket ban by the government in using natural forest timber, we are completely dependent on agro-forestry as well as imported raw materials. This makes our industry very inefficient compared to foreign producers who have abundant raw material resources available to them due to existing sustainable forest management policies being practiced by their governments. For instance, most European countries permit the usage of natural forest timber to their industries, yet, at the same time, the forest cover growth has been increasing year on year. It's a win-win situation as the industries get the resources, and the Government's objectives towards the environment are fulfilled. We, in India, need such policies and practices.
Also, in capital-intensive industries like MDF, power is a very big cost apart from being very critical to the optimal running of the plant. Unfortunately, the Indian infrastructure is not up to the mark where it can provide consistent, good quality electrical power at a good price. Power, being about 8 or 9 % of the product cost, if not consistent and of good quality, you have a lot of losses. If the plant keeps tripping, with every trip in the MDF plant, let's say two hours of production is gone because the moment one thing stops, the entire line stops. These are infrastructural issues that we face when thinking of new investment.
We don't have options of cheap freight. We are always using trucks. We don't have the option of efficient rail freight, which the government is not very active or friendly about, whereas if you look at factories in Europe or America, they just transport everything by train and it is extremely cheap to do so. As a result of using small trucks to transport our goods, there are a lot of damages, a lot of accidents and a lot of losses.
Getting more specific to the installation of plants, one of the big obstacles for Indian industry is a lack of technology and expertise within the country. There are not a lot of indigenous machine manufacturers, technology providers or for that matter, even consultants. We are still running very conventional and outdated technology. If you want to be innovative in your product offering and if you want to increase efficiency and reduce your costs to be competitive with foreign products easily available in the market, you still have to go abroad to find that technology.
Another very big difficulty is the finance cost in India is very high. We pay 13 or 14 % per annum which results in a very high interest cost and reduces our operating efficiency. One of the biggest obstacles is securing raw material. Due to the blanket ban by the government in using natural forest timber, we are completely dependent on agro-forestry as well as imported raw materials. This makes our industry very inefficient compared to foreign producers who have abundant raw material resources available to them due to existing sustainable forest management policies being practiced by their governments. For instance, most European countries permit the usage of natural forest timber to their industries, yet, at the same time, the forest cover growth has been increasing year on year. It's a win-win situation as the industries get the resources, and the Government's objectives towards the environment are fulfilled. We, in India, need such policies and practices.
Also, in capital-intensive industries like MDF, power is a very big cost apart from being very critical to the optimal running of the plant. Unfortunately, the Indian infrastructure is not up to the mark where it can provide consistent, good quality electrical power at a good price. Power, being about 8 or 9 % of the product cost, if not consistent and of good quality, you have a lot of losses. If the plant keeps tripping, with every trip in the MDF plant, let's say two hours of production is gone because the moment one thing stops, the entire line stops. These are infrastructural issues that we face when thinking of new investment.
We don't have options of cheap freight. We are always using trucks. We don't have the option of efficient rail freight, which the government is not very active or friendly about, whereas if you look at factories in Europe or America, they just transport everything by train and it is extremely cheap to do so. As a result of using small trucks to transport our goods, there are a lot of damages, a lot of accidents and a lot of losses.
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