Two years after start-up logging company, Vaitarna Holdings Private Inc (VHPI) was awarded forest concessions here, it is yet to establish the wood processing facility it had committed to.
The India-based company has exported unprocessed logs and seems likely to continue for the foreseeable future since it is some way away from establishing a plant for downstream processing, Stabroek News was told. Minister of Natural Resources and the Environment, Robert Persaud could not be reached for comment yesterday. Last year, when he was the junior minister for forests, Persaud had said that there would be no large scale export of logs by Vaitarna. Efforts to contact, Chethan Narayan, the director of the company were also futile.
VHPI, a subsidiary of Coffee Day Limited of India, in 2010 acquired the State Forest Exploratory Permit (SFEP) for 391,853 hectares of forest originally awarded in 2007 to US-based Simon and Shock International Logging Inc (SSI), after signing a Memorandum of Understanding with the Government of Guyana and with the original owners of SSI for a total buy-out in which 100% of the shares were transferred to a new subsidiary, Dark Forest Company (S) Pte Ltd. (DFCPL).
Subsequently, the company acquired the 345,961 hectares concession which was originally awarded to Caribbean Resources Limited (CRL). The government accepted an offer of $600 million by VHPI for the Timber Sales Agreement (TSA) which had been terminated and re-possessed by the government in 2010 from CRL, because of continuous non-compliance with the terms and conditions of the TSA. The total area now held by VHPI is 737,814 hectares of forest, around 1.822 million acres.
The company has been exporting logs from the former CRL concession since it has to convert the SFEP to a TSA before it can export logs from the former SSI concession. The export of 50 containers of logs was under the spotlight recently.
In a series of articles in Stabroek News, forestry expert Janette Bulkan said that Guyana has lost through allowing VHPI the export 50 containers of unprocessed logs of the best timbers, contrary to national policies which have been discussed and endorsed by the National Assembly.
She pointed out that in 2005, the GFC estimated a production cost of US$55/m3 from forest to mill gate or ship side, and US$62/m3 in 2007. She said that Asian loggers such as Barama and Ja Ling estimated US$80/m3 in their initial public offering background papers in 2007, apparently including an internal profit margin. By January 2012 the GFC estimate had increased to US$100/m3. No reason was given for the increase, but rising fuel prices could account for much of the difference, Bulkan wrote.
She said that VHPI’s 50 containers loaded to the maximum weight would take 1250 m3. The average declared FOB price for purpleheart was US$236/m3 according to the GFC Forest Sector Information Report for calendar year 2011 but the higher value timber washiba was the major component in these containers with a likely price of US$250/m3. The nominal profit to VHPI in Guyana from its recent shipments of 50 containers of logs would amount to about US$112,500, Bulkan said. She said that the probable profit to VHPI’s parent company in India for importing the unprocessed logs would be about US$257,500, while the probable profit to the company from exporting the unprocessed logs into China would be about US$512,500.
Bulkan said that the large probable profits on log exports from Guyana at the points of entry into India (New Mangalore port) and China (Guangzhou) are associated with the consistently low FOB rates reported from Guyana to ITTO in contrast to the rates for technically comparable timbers from other tropical regions. “This consistent difference is a strong indicator of (illegal) transfer pricing,” she said.
