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Shortages of forest raw materials and the development of small-scale enterprises in India.

Dr. Deep Joshi
Professional Assistance for Development Action (PRADAN)


Creating sustainable livelihood opportunities for the poorest is a central concern in most developing countries striving for social and economic revitalization. As millions join the ranks of the unemployed and underemployed every year due to population growth and increasing marginalisation of agricultural holdings, the capacity of the farm sector to provide additional livelihoods has progressively declined. In India, for example, crop agriculture is expected to account for less than 20 percent of the estimated 40 million standard person years of additional employment to be created during the Seventh Five Year Plan (1985-1990) (GOI, 1985). Even more limited is the scope for creating new livelihoods in the organised industrial sector. Significant increases in livelihoods must therefore be sought in the non-farm sector, including small-scale enterprises (SSE). Indeed, the non-farm sector in many countries such as India, represents the frontier for generating additional livelihoods. Within the non-farm sector forestry, particularly forest-based small-scale enterprises (FB-SSE) represent a major underexploited source of livelihoods.

Traditional approaches to the analysis of the SSE sector begin by identifying and analysing the constraints in relation to linkages and factors of production so that appropriate public policies and programmes may be promoted. Such an approach, however, is restrictive in that it looks only at the existing and potential entrepreneurs, that is, those who are already in business and would do better if factor and linkage constraints were alleviated, or those who would get into business if these constraints were less severe. An alternative approach is to begin with the livelihood context of poor people and the potential of the SSE sector to provide additional livelihoods and then analyse the constraints, including the lack of entrepreneurship itself. The policy and programmes that emerge from these two approaches can be quite different. In fact, factor constraints, particularly raw material constraints, can and should be turned into livelihood opportunities as some of the cases cited in this paper illustrate.

The traditional approach is particularly limiting in dealing with raw material constraints of SSEs based on renewable resources, such as forests, for the constraints in the enterprise sector are often opportunities in the resource sector. Appropriate integrative policies can lead to the revitalisation of both the sectors, generating sustainable livelihoods for the poor. In the first half of this paper we review raw materials constraints in relation to FB-SSEs following the traditional approach. In the second half we discuss the livelihood potential of FB-SSEs and present a few pilot experiments for developing SSEs.

Information regarding SSEs, particularly FB-SSEs is extremely limited even though there is a wealth of experience in this sector as SSE, especially traditional SSEs have been sources of livelihood as long as settled agriculture. This paper, therefore, relies heavily on experiences shared by individuals working in this sector as well as the author's own experience. The paper also suffers from the limitation that it is based entirely on the Indian experience.

Livelihoods from Small-Scale Enterprises

Small-scale enterprises are a major and one of the most rapidly growing sources of livelihood in some countries. In India SSEs are the second largest source of employment after agriculture. During 1984-85 SSEs provided employment to an estimated 31.5 million person, an increase of nearly 75 percent in a decade (GOI, 1985). This perhaps is a gross underestimate as many livelihoods of an enterprise nature in the so called informal sector, including collection and barter/trade of forest products, processing and vending, etc. are not included; many primary production activities such as rearing of silk worms are excluded; and activities, particularly in the forestry sector, which presently fall under the category of wage employment but can be organised as SSEs are not included. A good example in the last category is the bidi (tobacco rolled into the leaf of Diospyros melanoxylon) industry which is estimated to generate more than three million person years of employment1/.

1/Estimates in GOI, 1982 place employment at 3 million people in the industry which presumably means rolling, marketing, etc apart from 7.5 million people employed in collection of leaves during the flush season. A slightly lower estimate of 2.75 million person years results if one assumes 0.3 million tons of leaves collected every year, 2,000 bidis per kilogram of leaves, 20% losses, 700 bidis rolled per person day and average work year of 250 days. This estimate does not include employment in marketing.

The classification of SSEs is a fairly hazardous exercise as the prevailing norms tend to be grossly inadequate and there are major information gaps. In India, for example, SSEs officially are divided on the basis of technology into two categories, traditional and modern. Traditional includes all village enterprises, including handlooms and handicrafts, whereas modern SSEs are those employing modern technology, such as manufacturing, powerlooms, chemicals, electronics. SSEs have also been classified from the point of view of supportive policies, for which the norms used in India are assets (excluding land and buildings).

Employment norms are used in yet another classification, especially for regulation as the Factories Act applies to enterprises employing 10 or more persons if power is used and 20 or more persons otherwise and the Shops and Establishments Act applies to enterprises employing more than 5 persons. Excluded from these are SSEs in the so called informal sector which provides livelihoods to large numbers both in rural and urban areas, and is perhaps one of the more rapidly growing sectors in terms of the number of people occupied. Though all SSEs suffer many similar constraints, for example in relation to factor availabilities, the primary constraints often are quite different between traditional, modern and informal sectors. The primary constraints for many informal enterprises, for example, are the lack of institutional protection and support, and economic viability.

Modern sector SSEs typically tend to be concentrated in more developed regions and in or around urban centers. Traditional and informal sector enterprises, on the other hand, tend to be more widely dispersed, and often provide livelihoods to the most disadvantaged groups, such as women and other socio-economically disadvantaged segments of the population in both rural and urban areas.

Forest-based Small-scale Enterprises

Forest-based SSEs are a major source of livelihoods, particularly rural livelihoods in developing countries. In India, one estimate puts employment in collection of non-wood forest products (NWFP) alone at 1.6 million person years in 1982 (Gupta et al, 1982). Some of these products generate more than 10 times as much employment downstream (bidi rolling is a significant example) as in collection (Gupta, 1982). On average, it has been estimated that downstream processing creates four times as much employment as collection. Employment data for wood-based SSEs are not available, but one estimate puts the number of registered units in 1981 at 50,000 with the caveat that an equal number might be unregistered (which perhaps is an underestimate) (Chetty, 1985). This does not, of course, include individual carpenters and artisans. Another rural FB livelihood stream which is not accounted for in most estimates is that of collection and trade (as opposed to self-consumption) of firewood.

Considering that urban firewood consumption in India is estimated to account for one-third of all firewood consumed in the country, harvesting, transport and trade in firewood is a significant FB-enterprise and source of livelihoods (Alam et al, undated).

Most FB-SSEs, in employment and value added terms, tend to be in the traditional and informal sectors. NWFP collection and processing, for example, is overwhelmingly an informal, household enterprise providing livelihoods mainly to disadvantaged socio-economic groups, such as tribals, women and the landless. Since many FB-SSEs tend to be seasonal, e.g. collection, primary processing and trade in NWFP, the number of households dependent on these enterprises is far greater than the person years of employment would suggest.

Much of the potential of FB-SSEs, of course, remains unexploited. One estimate puts the employment potential in collection of NWFP alone in India at 4 million person years as opposed to estimated current employment of 1.6 million person years (Gupta et al, 1982). There would be corresponding employment potential in downstream activities, such as processing, marketing, etc. There is likely to be a similar slack in wood-based activities, though estimates are not readily available. More importantly, if one proceeds form the side of potential demand, on, the one hand, such as in tasar, oilseeds, tannins, resins, bamboo, charcoal, wood (including for urban centres and wood for generating electricity), and the low current productivity of lands classified as forests, on the other hand, the long term potential of FB-SSEs is likely to be far more than the most optimistic current estimates.

Much of the potential of FB-SSEs remains unexploited because of the lack of entrepreneurship, inadequate developmental efforts, including low investment, and factor constraints including raw materials supplies. In the following we review the nature of raw material constraints facing FB-SSEs.

Raw Material Problems of FB-SSEs and their Principal Causes

In discussing raw material problems we have considered both the raw materials used for processing into intermediate and finished products as well as primary products available for collection and trade. Raw material problems might be grouped into three categories, availability, quality and reliability of supplies, and prices. We shall discuss these in relation to FB-SSEs before reviewing the underlying auses.

(a) Availability of Raw Materials: Absolute scarcity, locational mismatch between availability and need, and lack of access are the principal constraints in relation to raw material availability for FB-SSEs. Absolute scarcity is perhaps the most important constraint, particularly for wood and bamboo-based SSEs. Other NWFP SSEs suffer from inadequate or less abundant supplies whereby the viability, particularly of enterprises based on collection and trade, is adversely affected.

Small enterprises can supply raw materials to large industries

Data about raw material shortfalls are not available even at aggregate levels, except for some estimates for industrial wood (GOI, 1985). However, the picture that emerges from the condition of forests, capacity utilization figures in industries like matches, paper and plywood, isolated case studies, and the rise in prices of forest products is that of widespread scarcity of FB-raw materials (Agarwal et al, 1985). Scarcity is particularly acute in relation to wood and bamboo to the point where even traditional livelihoods are threatened.

Locational mismatch between need and availability disproportionately affects informal, traditional and rural SSEs because of the lack of linkages, lack of capital and the fact that extraction/collection is often part of such enterprises. One recent study found that the nominal wages of basket wavers had declined by 25 percent in a decade from the early 1970s because bamboo was not locally available (Bhatt, 1981 in Gadgil et al, 1983).

Problems of access arise out of conservation pressure, for example, in the case of charcoal, faulty distribution system which is unable to cater to small producers, and management practices followed by forestry departments, for example in relation to auctions. Essentially lack of access implies that the enterprise is unable to get the raw materials otherwise locally present.

(b) Quality and Reliability of Supplies: In a situation of widespread shortages and locational mismatch between production and consumption, quality and timely availability are the obvious casualties. Wood and bamboo are particularly susceptible to these constraints as both are among the most scarce raw materials, with many competing demands and long supply chains. The rural SSEs are typically at the end of the supply chain and receive residual and low quality materials. Bamboo, for example, dries out if not used shortly after it is harvested and becomes difficult to use by basket weavers and other artisans. Many NWFP are susceptible to this set of problems because production and quality fluctuate due to natural causes.

(c) Prices: The prices of forestry based raw materials, particularly wood and bamboo have recorded significant increases worldwide. In India timber prices rose in real terms at an annual compound rate of 5.8% from 1970 to 1980 (Bentley, 1984). Price increases in recent years are likely to have been larger. Bamboo prices have registered similar increases as have the prices of firewood and fibres. Apart from trend increases in prices, certain NWFP with annual production cycles suffer severe price fluctuations. For example, the prices of tasar cocoons in certain parts of India fell by 44% during 1983-84 and then more than doubled in 1985 from their 1984 levels2/. Price fluctuations affect profitability and even viability where the eventual consumers are poor people, or where non-FB substitutes become competitive, such as in the case of certain fibre products.

2/Data for 1983-84 are from FAIR, 1985. Data for 1985 are based on informal surveys in Bihar, India.

Causes of Raw Material Problems in FB-SSE

The predominant causes of raw material problems, at least in the Indian context, are widespread loss of forest cover and low productivity of forests. We shall discuss these and other causes in the following. We shall examine three sets of causes here, those related with the source of raw materials, that is forests, institutional causes, such as market forces and those related with public policy and administration.

(a) Resource-related Causes: The overarching raw material constraint - scarcity - can be traced to low and rapidly shrinking stocks of forests, their low productivity, loss of diversity and poor geographical distribution.

In India, out of some 83 million hectares (mha) of land officially classified as forests and permanent pastures only 23 to 46 mha are estimated to have any tree cover.3/ From 1970 to 1980 the loss of tree cover is reported to have been 1.5 mha per year (GOI, 1985). The productivity and stocking intensity of the remaining forests is also reported to be far below potential.4/ Estimates of productivity range from four to 25 percent of potential. More important from the point of view of rural FB-SSE livelihoods than aggregate stocks and mean yields are the spatial distribution and diversity of the remaining forests, for the availability or local abundance of forest-based raw materials bears a strong correlation to these aspects. Disaggregated data of this nature is not available though one estimate suggests widespread loss of diversity (Gadgil et al, 1983). However, what emerges from an analysis of the nature and processes of deforestation is that the loss of forest cover has been most serious in accessible areas, in mixed forests and near settlements in forests which carried heavy burdens of rights and concessions.

3/See for example Gadgil, et al, 1983; Bentley, op cit.; GOI, 1985; GOI, 1982

4/Gadgil et al, op cit.; Bentley, op cit.

Many forest-based rural enterprises, particularly those in the traditional and informal sectors, serving the most disadvantaged groups combine collection/extraction with processing and trade. For such enterprises distribution and diversity are far more important than the aggregate stocks in the country as the loss of nearby resources cannot be compensated for by more distant resources. Among the well known reasons for this state of affairs are the open access nature of many of India's forests, over-exploitation (both planned and unplanned), inappropriate exploitation particularly of NWFP, gross underinvestment over the years and the absence of an SSE perspective in afforestation efforts which has often resulted in narrow choice of species and lack of coordination between plantation and SSE development efforts.

(b) Institutional Causes: Among the institutional causes for raw material problems are competing demands, the nature of raw material markets and the absence of infrastructure.

Raw material users in rural FB-SSEs compete for scarce supplies with urban consumers, industry and other end-uses like firewood. Wood is a notable example where the urban markets account for 80 percent of sawn logs (Chetty, 1985). As forests have diminished and supplies have become more centralised, the terms have become more favorable to the urban centres because they are better served by the processing and distribution network. Wood processing is now overwhelmingly an urban enterprise, partly because that is where most of the demand is, but also because of the factor and linkage situation. Bamboo, which was once considered a weed and was easily available to rural artisans, is a classic example where the raw material supplies for rural SSEs have been affected by competing demands from the paper industry. Paper mills claim the lion's share by virtue of long leases from the Forest Administration for the supply of bamboo. Certain grasses used for rope making, similarly, have alternative uses in the paper and board industry.

Firing the charcoal Kiln

In the case of certain raw materials the structure of the markets militates against the needs of small rural enterprises. Wood is a case in point where the market is oriented toward bulk buyers and urban markets and is simply not geared to serve small, decentralised rural enterprises. Trade in Diospyros melanoxylon leaves is another example. Various state governments nationalised the collection of this particular raw material some years ago. However, collection in most states is still done by labour contractors and the collected leaves are eventually purchased from forest department auctions by monopsonists who are also monopoly producers and supply these leaves to millions of small producers for rolling into bidis on a contract basis on what are widely known to be exploitative terms (Anuradha et al, 1984).

The lack of infrastructure is a constraint especially for enterprises engaged in the collection, processing and trade of various NWFP, for example oilseeds of tree origin, myrobalans, etc. Thus, in spite of an abundant “crop”, say of Shorea robusta seeds, villagers who depend on the collection and trade of this product may not be able to collect it because of lack of roads, intermediate warehouses, etc.

Another example is the lack of infrastructure for providing disease free layings of the tasar insect to villagers who rear it for tasar cocoons.

(c) Public Policy and Administration: Certain policies and practices followed by forestry administrations also contribute to raw material problems for rural FB-SSEs. For example, forests are often divided into large units for purposes of exploitation and management. Consequently, households and small enterprises are not able to bid in auctions and must buy the raw material from intermediaries at high prices, even though it literally grows in their backyards. Similarly, forest departments are not geared to respond flexibly to the requirements of small entrepreneurs.

Raw material is typically sold in large lots through auctions on an as is basis from sparsely located forest depots, and because of accountability requirements as a public agency, rigid operating procedures are followed. And finally, forest departments may also prohibit the removel of wood for certain enterprises, such as charcoal due to conservation pressures.

Organisations and Programmes to Alleviate Raw Material Problems

There are four sets of official agencies (other than banks) in India engaged in providing assistance to small-scale enterprises. These are agencies with sectoral responsibility, such as forestry administrations; agencies whose concern is the development of certain commodities such as silk, coir, etc; agencies created specifically for the promotion of small-scale enterprises; and banks and financial institutions. In addition, agencies engaged in rural development administration and private voluntary organizations also provide assistance to small-scale enterprises.

Sectoral agencies typically provide assistance to SSEs to the extent that such assistance constitutes their broader sectoral goals and mandates. This includes promotion and administration of appropriate policies and provision of technical assistance. These agencies typically are organised territorially and do not have separate divisions responsible for assisting SSEs.

Agencies created for the development of certain commodities and products provide assistance to SSEs where such enterprises are the key actors in the particular commodity. In India silk, coir and handlooms are among examples where the small-scale enterprise sector plays an important role in the primary production and processing and promotional agencies have been created to provide assistance to SSEs. These agencies typically promote research and development; provide policy support, such as through price support, government purchasing, etc; technical and infrastructural extension; and often have an apex organisation which performs broad promotional and developmental functions (for example the Central Silk Board, the Office of the Development Commissioner for Handlooms) with a state level organisation with operating responsibilities (for example, the departments of sericulture).

Separate agencies have also been created for promoting and assisting SSEs. In India there are two sets of SSE assistance agencies - the (all-India) Khadi and Village Industries Commission (KVIC) and its state-level counterparts, the KVI Boards; and the small-scale industries (SSI) administration consisting of the SSI directorate of the central government, state SSI directorates, District Industries Centers (DICs), the National Small Industries Corporation (NSICS), the state-level corporations and various training, consulting and entrepreneurship development institutions.

The KVIC was established as an independent promotional body through an Act of the Indian Parliament in 1957. Its state-level counterparts, the KVIBs, similarly, are statutory bodies. Operationally, the KVIC functions through the KVIBs, several affiliated (non-governmental) grassroots institutions, producers' organisations, and PVOs. This set of agencies provide assistance to enterprises engaged in spinning and weaving and a group of village industries (including, for example, carpentry, bamboo work, oil extraction, etc.), which together are officially called the “Khadi and village Industries Sector”. These agencies provide support in relation to training, technology development and extension, supply of raw materials, tools and equipment, marketing, and credit.

The SSI agencies perform promotional and facilitation functions, such as policy development, facilitation with regard to institutional and infrastructural support, incentives and subsidies, supply of scarce and imported raw materials, marketing, etc.

Banks and Financial Institutions also provide assistance to SSEs by way of special lending programmes and policies.

Public agencies concerned with development administration and grassroots PVOs also provide assistance to SSEs. The former primarily are concerned with training, administration of inventives and subsidies and marketing support. The latter where such efforts exists, provide broader support including provision of raw materials.

Raw Material Assistance to FB-SSE

Raw material assistance to FB-SSEs is provided primarily by forestry administrations and the KVI institutions. Grassroots PVOs are involved in isolated instances. In the case of tasar the institutions concerned with the promotion of sericulture are involved. We shall discuss these efforts and their limitations in the following.

(a) Forestry Administrations: The efforts of forestry administrations to provide raw material for FB-SSESs in India can best be described a combination of administration of concessions and sale of raw material. Furthermore, these efforts are carried out on any scale in respect of only two commodities, timber and bamboo. The practices followed fall broadly in the same pattern all over India (GOI, 1984).

Timber (for construction, carpentry, crafts and implements) is made available in two ways. Firstly, forestry departments permit the removal of timber of up to some specified size, quality and quantity to bonafide users either free or at a subsidised rate from the forests. This is in recognition of traditional rights and concessions enjoyed by the rural population. The second mode is through sales and auctions from forestry depots where users from SSE are free to buy the raw material, if available. In some cases the forestry departments, again by way of a concession, stock certain kind of timber for special applications, for example billets of Acacia catcechue for making bullock cart hubs.

Bamboo is made available in three different ways. In certain parts of the country the rural people are allowed to remove if for house construction in exercise of their tradition rights. Secondly forest departments sell bamboo from their depots along with timber. And finally, forest departments provide specified quantities of bamboo to certain identified groups of traditional bamboo workers in different pockets in the country.

For example, the Buruds in Andhra and Maharashtra, the Basores in Madhya Pradesh, the Vansfodias in Gujarat, the Turis in Bihar, etc. are permitted to collect bamboo in prescribed quantities every year from forest department depots at subsidized prices. In some cases (traditional) bamboo workers' societies have been formed to facilitate the administration of this concession.

There are both operational and conceptual problems with this system of supplying raw materials. The operational problems are lack of flexibility, centralised and infrequent availability, poor quality and high administrative cost to the forest departments. In selling timber, for example, the prices are based on the rolling average of previous three years' prices and stocks are sold on an as is basis. The depots typically stock round wood rather than sawn or cut pieces. If a carpenter, for example, needs only half of the log in stock he may not get it; nor would the depot charge more of less than the predetermined price to account for quality differences or if it happens to be at variance with the prevailing market prices. The depots typically are in the nature of godowns rather than retail distribution points - few and far between, situated in some urban locality or concentrated near forests (though there are moves in some parts of the country now to set up a denser network of sale points particularly for firewood). Raw material may not always be available in the depot and auctions are not held with any predetermined regularity. There are problems of quality, particularly in the case of bamboo which is often transported through long distances and in the process dries out and becomes useless to the artisan. Administration of concessions, such as in the case of bamboo, in an environment of widespread scarcity is prone to malpractices on the part of the Administration as well as the beneficiaries of the concession.

SSE's can meet the raw material needs

The larger problems, of course, are conceptual. Forest administrations typically (except to a limited extent in working with the tribals) are not geared to provide raw materials, much less broader support, to rural FB-SSEs. The support is in the nature of concessions to traditional (as opposed to new) producers. Thus, by and large, no attempts have been made to raise plantations to augment raw material availabilities for rural FB-SSEs and to develop an infrastructure for pre-processing, storage and distribution. Forestry administrations have not incorporated SSE development into their policies, programmes and organisation as a means to develop forests by linking rural livelihoods to the regeneration of forests. The current efforts therefore amount to an exercise in rationing shortages and protecting traditional livelihoods (to the extent possible in an environment of growing scarcity) rather than investing in future forest growth for generating additional livelihoods.

(b) SSE-Support Agencies: The SSI institutional infrastructure primarily caters to small-scale industries in the modern sector. Typically, they provide assistance in relation to imported and scarce raw materials. The most relevant support agency for FB-SSEs in India is the Khadi and Village Industries (KVI) infrastructure. In each state the KVI Boards arrange raw material supplies which are distributed through their network of godowns and production centres.

Requirements of raw materials, for example, wool, cotton, cocoons, etc. are estimated every year on the basis of information provided by affiliated institutions and enterprises. The raw material is then purchased in bulk and distributed. The KVI infrastructure also acts as a raw material procurement agency, particulary in relation to certain forest products, such as oil seeds of tree origin, fibres, cocoons, medicinal plants, etc. These raw materials are, in turn, supplied to affiliated SSEs and institutions. Thus, marketing and raw material supply support to SSEs complement each other.

Unfortunately, the KVI infrastructure has a limited outreach, both geographically as well as in terms of enterprise types. For example, it serves only a fraction of the artisans in the country. Coverage has been particularly low in relation to certain FB-SSEs, such as bamboo work, cane and carpentry (KVIC, undated). KVIC has, however, played an important role in developing FB-SSEs based on collection, processing and trade of certain NWFP, such as oilseeds, medicinal plants and herbs. In any event, the KVI infrastructure cannot enhance the production of FB-raw materials which is primarily the concern of the forest departments.

(c) Other Agencies: Private voluntary organisations, certain government programmes, such as for the tribals, and agencies created for certain commodities, such as silk, or SSE products such as handicrafts, also provide raw material assistance to rural FB-SSEs. In terms of coverage of FB-SSEs, however, their efforts are fairly limited.

Turning Constraints Into Livelihood Opportunities: An Alternative Perspective on FB-SSEs

The major drawback of organised assistance to FB-SSEs is the absence of a comprehensive strategy to develop rural livelihoods by integrating, through a dynamic process of resource exploitation and reinvestment, the productive potential of undermanaged forests with demand for goods and services in a growing economy. FB-SSEs fall between the two sectoral stools of conventional analysis: forestry and small-scale enterprises. The dominant concerns in forestry analyses typically have been macro issues of resource degradation, sustainability and the aggregate flows and stocks of industrial raw materials (and in recent years firewood). SSE concerns affect forestry only in as much as certain forest products - such as the so called minor forest produce - which form the basis of SSE-based livelihoods are a source of revenue to forest departments, and to even a smaller extent where certain traditional rural occupations are threatened because forest-based raw materials have become extinct. Major recent forestry initiatives, therefore, have been large-scale tree plantation programmes of more or less uniform design, tightening of conservation measures and regulation of the collection of and trade in the so called minor forest products. The positive role that SSE-based livelihoods could play even in addressing the conventional macro concerns of forestry is not adequately realised.

Conventional analyses of SSEs, on the other hand, begin with the problems of entrepreneurs and enterprises. Attention is focussed on the constraints of factor inputs and linkages inhibiting the viability and growth of the enterprise. Interventions seek to alleviate these constraints, typically through extension, services and support programmes. This approach serves a useful purpose in promoting the growth impulses in the society. The more entrepreneurial sections, more developed regions and high return sectors benefit from it and wealth is indeed created. The poorest, however, are not among the entrepreneurs, nor are their livelihood streams among the dynamic sectors in the forefront of conventional SSE support. Yet the greatest scope for expanding livelihood is in enabling the poor become entrepreneurs who will invest in the rural and less dynamic sectors like forestry, food processing, livestock rearing, renewable energy, etc.

A broader approach to forestry which begins with the potential of the sector for generating independent livelihoods for the rural poor through FB-SSEs would reveal that through such FB-SSEs the rural poor can be major producers and investors in forestry, rather than destroyers (or at best consumers) of forests as they are presently seen. Thus, rather than shutting off a promising livelihood stream by banning charcoal production, a more creative approach might be to promote charcoal industry whereby poor rural people can raise plantations for making charcoal. Forestry administrations also need to go beyond the traditional conception of rural FB-SSEs, such as basket making, collection of NWFP, etc. into more promising lines such as production and processing of NWFP for urban and industrial uses, pulp industry, energy, etc.

A similar approach in SSE analysis which begins with the livelihood contexts of poor people is likely to reveal that they are unable to exploit the livelihood potential of SSEs - forestry-based or otherwise - for a variety of reasons which go beyond factor constraints. Among the critical non-factor constraints are the inability of the poor to bear (or reduce/manage) the risks, identify and develop and SSE idea into a set of activities, establish or develop a network of linkages from their present position of social and economic disadvantage, make demands on public policies, programs and infrastructure. In short, poor people operate below what might be called an entrepreneurial threshold. Approaches to develop rural SSEs based on such an analysis would presumably seek to address these constraints so that they can reach such a threshold. These two approaches could be combined into what we call “Foster Entrepreneurship”5/ in FB-SSEs. In foster entrepreneurship an external agency takes on the role of an entrepreneur.

5/The term “foster entrepreneurship” is used by Vijay Mahajan of Professional Assistance for Development Action, New Delhi, to describe the rural industrialisation project of his organisation. Public policies to promote private enterprise, some would argue, would produce the same results much more efficiently as a program of foster entrepreneurship. Indeed, the growth of small-scale industries in India and certain recent initiatives in forestry and wastelands development (see GOI, 1982) would seem to support the private enterprise model. However, the same data also shows that while the growth and productivity concerns are addressed by this model, the distributional concerns of generating livelihoods for the disadvantaged rural groups are not.

This entrepeneur identifies livelihood ideas for poor people, converts them into sets of activities which become livelihoods for the poor, establishes the necessary organisation, linkages, processes and factor flows, manages the “enterprise” until such time that the poor can take over some or all of the managerial functions and then either withdraws or reduces itself into a service, managerial or partnership role. A well known example of such a process is the Amul experiment in dairying in India and the dairy development programme based on it. The activities of the founders of Amul and the institutions they helped establish go far beyond extension, service support of any combination of what development administration seeks to do, and can only be described as entrepeneurship.

Forestry-based small-scale rural enterprises are particularly suited to such a developmental approach for several reasons. Many promising FB-SSE livelihood opportunities would need some initial developmental input, such as tasar, shellac, energy (firewood plantations for urban markets, charcoal and electricity generation), oilseeds of tree origin, etc. which is beyond the capacity of a single poor household and beyond the scope of any single line agency. There are questions of scale, access to land and vertical integration which cannot be tackled at the level of a household or even a village. Intensive forestry (as opposed to the management of natural forests) is not a traditional rural occupation in most places. Forestry has long gestation periods and many FB-SSE ideas have high or unknown risks. And most importantly, the long-term sustainability of forests in many developing countries hinges on creating what has been called “livelihood-intensive development”, that is a new dynamic of resource exploitation and reinvestment, which requires an integration of perspectives.

Many pilot efforts of this nature are already underway in India, both in forestry-based and other rural SSEs. We describe a few such examples in the following.

(a) Utthan's Wastelands Development Project: Utthan is a private voluntary organisation in Gujarat state in Western India, working in a group of villages off the gulf of Cambay. Due to sea water ingress most of the land in these villages (in some cases as much as 90% of the village land) has highly saline soils, underlain with a high saline water table. Since the crop productivity of these soils is very low, most people supplement their livelihoods from migratory wage labor. Thinking that improvements in livelihoods in the region depended on increasing the productivity of these saline wastelands, and that forestry might be one way of using these lands, Utthan began exploring forestry possibilities. They found that two tree species, namely Prosopis juliflora and Salvadora persica grew naturally in that area. In fact, collection and sale (to traders from Bombay) of Salvadora seeds was already a subsidiary means of livelihood for some people though collection had been falling in recent years due to progressive destruction of Salvadora stands by migratory camel herds and firewood collectors. Prosopis also was a source of income through sale of firewood in towns and to lime and brick kilns. Furthermore, Prosopis could also be used for making charcoal for sale in Bombay and Ahmedabad.

The villagers, however, had never planted either tree, partly because it is not a traditional activity, and partly because no one from the village took the lead to put together the necessary organisation, technology and capital required (which later turned out to be a substantial effort) for raising such plantations. Indeed, the villagers could not have figured out the viability of such an activity and the fact that there might be ways to enhance such viability through better marketing and product development efforts.

The Utthan team working in these villages consulted soil salinity researchers and others with relevant experience, and explored the markets for Salvadora seeds (for industrial oil), charcoal and firewood. They came to the conclusion that both Salvadora and Prosopis could be profitably cultivated in the region and that livelihoods could be generated from SSEs consisting of cultivation of these tree species on private and community wastelands, and processing and sale of their produce. They also concluded that since such an activity has not been tried before, and the risks and yields are not fully known, the first lot of plantations ought to be financed through concessional loans. After initial trials, a pilot project has not been put together involving 78 families for raising plantations this year (1986) using concessional finance from a public agency. New and more profitable linkages for marketing Salvadora seeds have already been established and eventually, when there is sufficient production of seeds, oil extraction would be done locally. Similarly, when Prosopis plantations are ready, a charcoal industry would be set up. Utthan has helped the villagers develop an informal forum for carrying out the project which would later be made into a formal organisation. Utthan eventually plans to withdraw once the entire venture is a “going concern”.

A prosipis plantation

(b) PRADAN's Rural Industries Project: Professional Assistance for Development Action (PRADAN) is an all-India private voluntary organisation. It was set up originally to provide “on-line” professional assistance to grassroots PVOs by placing their staff in these PVOs on a full-time, medium to long term basis. Later it decided to start grassroots action projects of its own, particularly where there was need and potential to break new ground. The first such project PRADAN has chosen is to promote small-scale rural enterprises. Unlike the Utthan project, where the entrepreneurship role in some ways evolved over a period of time, PRADAN was quite clear from the beginning (on the basis of its grassroots developmental experience) about its role as a foster entrepreneur to identify and develop livelihood ideas for poor people into independent going concerns.

A project team established a “line of support” with the Industrial Development Bank of India (IDBI) and set up a promotional, not for profit company under section 25 of the Indian Companies Act. This company, which included the project team members as functionaries, identified a geographical area (on the basis of need and potential) for its first set of rural enterprises, identified venture ideas, developed them into detailed enterprise proposals including the eventual organisational format for “handing over”.

The three venture ideas chosen for pilot projects so far are light engineering, poultry and mushroom cultivation. Of these, the last two are already underway. Tasar and other FB-SSEs are likely future ventures and exploratory work is underway on tasar. The organisation chosen is a private limited company for each venture-location combination. This company would have shares from the primary producers. It would initially be controlled by PRADAN's promotional company but would eventually be handed over to the producers. The responsibility of PRADAN's promotional company (which has an equity loan from IDBI for one venture and would seek similar participation for other ventures from IDBI and other financial/banking/government institutions) would be to develop each enterprise into a going concern before control is transferred. The project would also draw on relevant government programmes meant for the poor whom this project proposes to serve. For example, participating producers would develop their equity by taking term loans from the government's rural credit programme.

(c) Various Tropical Tasar Development Projects: Tasar is among the more promising FB-SSE possibilities in India in which the present level of activity is estimated to be far below the potential for generating rural livelihoods. Tropical tasar is the fabric produced from the silk cocoon of the insect Antherea mylitta which feeds on the leaves of various Terminalia species (leaves of several other tree species are secondary food source). Traditionally, tasar insects have been reared in the wild (which is also its natural habitat), on trees in forests or field bunds. The productivity and value added (to labour) under these conditions are low, and raising and collection of tasar cocoons has remained a subsidiary activity among tribal people. Until about two decades ago the tasar industry catered almost exclusively to the domestic traditional market of fine fabric made from twisted yarn producted through thigh or palm reeling, a process which involves tremendous drudgery, and not surprisingly, has been carried out by women and children.

While most tasar even now comes from open forest rearing and yarn is still mainly reeled, several developments in the past few years show great promise, both for generating new livelihoods as well as for reducing drudgery in this industry. These are, the opening of new product-market combinations - the modern domestic market and the export market, both using coarser, spun yarn and blends - and the development of new rearing systems whereby the insect can be reared on block plantations of closely spaced and pollarded Terminalia arjuna trees. Labour productivity under these conditions is much higher, risk are more manageable and organisation much simpler. Some estimates put the break-even price of fabric under these conditions at half the current ruling price, with obvious implications for potential market.

Several recent initiatives aimed at exploiting the livelihood potential of tasar resemble the foster entrepreneurship examples cited earlier. Perhaps the most developed among these, though small in its coverage, is the work being done by Mahila Vikas Sangh (MVS), a consortium of grassroots PVOs in the Indian state of Bihar.

Approximately five years ago four grassroots PVOs with a broad spectrum of rural development programmes including tasar formed MVS to share common networking, technology transfer, fund raising and marketing services for an integrated project based on tasar for generating new livelihoods for poor rural women. Each member agency has since developed a training-cum-production centre, decentralised community production centers (spinning and weaving) and trial block plantations. They still buy most of the cocoons from the market but eventually the village women would raise arjuna plantations on private, community or government wastelands for rearing the insects, spin the yarn and convert it into fabric. At present MVS and its constituents provide all the services - procurement of cocoons and disease free layings, design inputs and marketing, inputs for new plantations, training of new people and management. The long-term organisational design has not yet been worked out, but conceivably these functions could eventually be transferred to some integrating enterprise controlled by the producers. A similar project might soon be started by PRADAN.

(d) Initiatives by Forestry Administrations: Forestry and Tribal Development Agencies in several states in India have taken up income generating projects, playing a somewhat similar role to that of a foster entrepreneur. Many of these tend to be in the nature of production centers of questionable independent viability, with the tribals as wage labourers, and inadequate development of backward and forward linkages, but the seeds of the idea are there. An interesting example is a plywood, veneering and saw milling unit established by the Madhya Pradesh Forest Development Corporation in which the tribals as primary producers are shareholders.

In all the cases cited above there are many unresolved questions, such as replicability, spread, independent viability, etc. What is important, however, is that each begins by addressing the question of SSE livelihood potential for poor people (in case of FB-SSEs integrating such livelihood concerns into forestry development) and not from the constraints faced by existing or potential enterprises.

As a consequence, the ruling constraint which has been implicitly or explicitly identified and alleviated is the lack of entrepreneurship itself. The result, or more appropriately the promise in each case is not a temporary resolution of the operating constraints of factor unavailability and absence or breakdown of linkages as in traditional SSE promotion but a more dynamic and long lasting integration of forestry development and generation of FB-SSE livelihoods for the poor.

Role of International Agencies

The state of knowledge in relation of FB-SSEs (and SSEs in general) can only be described as abysmal. Various estimates are available of employment potential in forestry and of revenue and output potential of various forest-based commodities. A few isolated case studies describe the problems of basket makers here (for many groups marketing rather than raw materials is the ruling constraint) or carpenters there. Systematic research is almost entirely lacking. Promoting such research and its dissemination is one area where international agencies can contribute.

The second area where donor assistance might be beneficially applied is in fostering pilot initiatives which integrate through FB-SSEs new livelihoods for the rural poor with the regeneration and development of forests.

The third possibility for donor assistance is promoting cross fertilisation of ideas and knowledge between initiatives across different SSE sectors within and across developing countries.

Forest worker debarking potes

Bibliography (Joshi)

Agarwal, A. and Narain, S., (eds.), 1985 “The state of India's Environment 1984-85: the Second Citizens' Report”, Centre for Science and Environment, New Delhi.

Alan, M., Dunkerlay, J., and Reddy, A., undated “Fuelwood Use in the Cities of the Developing World: Case Studies from India”, mimeo.

Anuradh, G., Eswara Prasad, K.V. and Akhter, Syed, 1984 “Women Beedi Workers in Vellore: An Attempt at Organisation Building”, National Labour Institute, New Delhi, mimeo.

Bentley, W.R., 1984 “The Uncultivated Half of India: Problems and Possible Solutions”, Discussion Paper 12, Ford Foundation, New Delhi.

Bhatt, S.R., 1981 “Problems of the Management of Bamboo Resources in Tamilnadu”, Indian Institute of Management, Bangalore, mimeo.

Chambers, R., 1986 “Sustainable Livelihoods: An Opportunity for the world”. Commission on Environment and Development, Institute of Development Studies, Sussex, mimeo.

Chetty, N.V. Ramachandra 1985 “Social Forestry and Forest Based Small-Scale Rural industries”, Indian Forester, Vol. 111. No. 7, pp. 678-692.

FAIR, 1985 “Study of Silk Handlook Industry, Vol. 2”, Foundation to Aid Industrial Recovery, New Delhi.

Gadgil, Madhav, Narendra Praad, S., Ali, Rauf, 1983 “Forest Management and Forest Policy in India: A Critical Review”, Social Action, Vol. 33, April-June, 1983, pp. 127-155.

GOI, 1982 “Report of Committee on Forest and Tribals in India”, Government of India, Ministry of Home Affairs, Tribal Development Division, New Delhi.

GOI, 1984 “Report of the Committee for Review of Rights and Concessions in the Forest Areas of India”, Government of India, Ministry of Agriculture, Department of Agriculture and Cooperation, Forestry Division, New Delhi.

GOI, 1985 “Seventh Five Year Plan 1985-90”, Vol. II, Government of India, Planning Commission, New Delhi.

Gupta, T., 1982 “Land and Forest Resource Management for Economic Betterment of the Poor in Rural India”, Indian Economic Almanac, September, 1982, pp. 76-81.

Gupta, T., and Guleria, A., 1982 “Non-Wood Forest Products in India”, Oxford & IBH Publishing Co., New Delhi.

KVIC, undated “KVIC - A Pioneer in Rural Reconstruction”, Khadi and Village Industries Commission, Bombay.

Narain, R., 1984 “Discussion Note on Mahila Vikas Sangh”, Ford Foundation, New Delhi, mimeo.

Ramachandran, P.G., 1977 “Some Imperatives for Bihar and Indian Forestry”, OPTIMA, New Delhi.

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