Indian company controls 1.82M acres of forest

-plans to export logs for furniture manufacturing

An Indian company that took over a forest concession in a biodiversity-rich area has been granted an additional concession to harvest lumber, which it will ship to India to make furniture and this was only disclosed yesterday by the government after questions were asked.

The forest area held by Vaitarna Holdings Private Inc. (VHPI), a subsidiary of Coffee Day Limited of India under its local subsidiary Dark Forest Company (S) Pte Ltd (DFCPL) has been increased to 737,814 hectares of forest (around 1.822M acres) after it acquired the second concession. The government further disclosed that it had accepted $600M from the Indian company for the expanded acreage and this money was used to meet the sums outstanding to Clico policyholders following the collapse of the local company. The government statement came after the media began asking questions about a Times of India report on the deal.

V. G. Siddhartha

Operational activities have already commenced in the new concession while the company awaits environmental authorisation to begin work on its first concession. It is unclear what plans and permits have already been approved for its second concession. The acreage held by the Indian company – owned by V. G. Siddhartha – is nearly double that of the Iwokrama sustainable forestry development concession and around half of Barama Company Limited’s massive 3.2M acre concession in the North West.

Last year, VHPI took over the State Forest Exploratory Permit (SFEP) for 391,853 hectares of forest originally awarded to US-based Simon and Shock International Logging Inc (SSI) in 2007. The Guyana Forestry Commission (GFC) yesterday said that due to prolonged non-compliance with the terms of the agreement by SSI, the SFEP was suspended in 2009.

After completing the necessary due diligences, the Government of Guyana approved a request for a 100% change in the shareholders of SSI to VHPI, the statement said. “This approval in 2010 was also contingent on payment of all outstanding SSI fees (US$ 254,000), and a commitment to execute a forest inventory, prepare a business plan, and conduct an Environmental and Social Impact Assessment (ESIA) for submission to the GoG,” the statement added. It said that work is currently being finalised in these three areas. Once these are successfully completed the company can pursue the Timber Sales Agreement (TSA) which would allow for project implementation

The GFC said that at the same time, the TSA awarded to Caribbean Resources Limited (CRL) was also terminated and re-possessed by the government in 2010, because of continuous non-compliance with the terms and conditions of the TSA. It said that the government accepted an offer of $600 million by VHPI to re-allocate this re-possessed concession of 345,961 hectares.

The re-allocation was done last year but was not announced. “The sum of G$600 million was applied to help meet liabilities owed to policyholders of Clico (Guyana), given that CRL is part of the same group of companies as Clico which went into receivership in 2010,” the statement said, adding that CRL continues to have significant indebtedness to Clico (Guyana).

VHPI has applied for environmental authorisation to start a logging and sawmill operation at its first concession in Region Nine. This was disclosed in an environmental notice in January of this year. The Environmental Protection Agency (EPA) has said that an Environmental Impact Assessment (EIA) is required for the project before any decision to approve or reject the proposed project is taken since the project may have significant impacts on the environment.

The project site is in the biodiversity-rich area surrounding the Iwokrama rainforest preserve. The forest concession is situated in the Upper Corentyne-Essequibo District and southeast of the Iwokrama Protected Area. It is south of the Sherwood Forests Inc.’s concession and East, West, and South of the Conservation International (CI) concession.

According to the project summary, the company plans to establish a composite logging and sawmilling operation with associated downstream processing plants and kiln drying facility. Housing for employees with electricity and potable water supply and other auxiliary facilities will be provided in order to realize the goals of the main beneficiaries and the vision of the Company. The project will be solely financed and managed by DFCPL, with a proposed total investment of US$18.7M during the first five years stated as 2010 to 2015.

The summary says that during the pre-harvest phase of the operation, employment by the company is expected to be in the vicinity of 45 personnel. However, this figure will be increased to 321 persons once harvesting and processing activities commences. The life of the project is 25 years.

Meantime, in a report on the project yesterday, the Times of India said the company plans to transport cut logs on chartered ships from the Guyana to the Coffee Day Group’s furniture plant in India. It said that the wood varieties to be shipped will include Greenheart, Purpleheart, Wallaba and Bullet Wood. The royalty to be paid to the Guyanese government is not clear. The company is planning to ramp up its furniture business in India and the new Dark Forest Furniture Company “will represent all segments of furniture including modern, classic, ethnic for home, retail, office, lounges and life-style and entertainment furniture.”

The report said that the government here is in the process of rectifying a non-functional woodcutting and log-sizing unit at the leased forest area and shipping of logs will start once that unit becomes functional.

Regarding its first concession, the company has said that processing operations are planned to be located at or near Annai. Initially, the company will use portable mills to process logs into lumber until a stationary sawmill is established. The sawn lumber will be transported from Annai to Linden. Then from Linden, lumber will be shipped out to India for further processing. The bulk of the production, initially, will be exported to India, other Asian countries and Caribbean markets, the summary says.

Forest use has come under increased scrutiny here with Guyana involved in the Low Carbon Development Strategy and a US$250M deal with Norway to reduce emissions from deforestation and forest degradation.  Incentives have been set for Guyana to keep 99.5% of its forest cover intact and payments will be reduced should the deforestation rate goes over last year’s level.  On Wednesday, Agriculture Minister Robert Persaud announced that the agreement with the largest logging company operating here, Barama Company Limited will be reviewed and its 1.6 million hectares forestry concession is likely to be reduced.

Critics have argued that when exploration permits fall into non-compliance like Simon and Shock’s they should be submitted to a fresh process rather than allowing the defaulting company to enter a transaction which allows it to recoup its investment and perhaps make a profit. Critics have also argued that oftentimes logging companies promise downstream processing to obtain concessions but this hardly ever materialises or only at a low level; the main objective being the export of logs.

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