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 Students belonging to Under-graduate or Post-graduate colleges across India

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 Any submission deemed inappropriate or unsuitable will be disqualified
 Any deviation from the above will result in immediate disqualification of the entire team

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and respective email Id’s)
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references should be given due credits
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 Teams need to upload the file latest by 3rd Oct'19, 11:59 PM on this page itself
 Any deviation from the above will result in immediate disqualification

Main Event
 Top teams after preliminary round will get the chance to present their solutions to an eminent
jury panel at IIFM-Bhopal Business Conclave, Coalescence on 19th October 2019.
 All decisions in the matter of eligibility, authenticity & final judgment will be with IIFM,
Bhopal.

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Indian Institute of Forest Management, Bhopal
The Grey Say: Case Study Competition

Case Summary
A State Forest Development Corporation (SFDCL) owns large scale Eucalyptus plantations
having an extent of 25,166 ha which has been strategically transformed from seed to clonal
origin. As a result, the productivity of these plantations has risen by 92% (from 25 to 48 MT/ha)
and the auction price by 141% (from Rs. 2,575 to Rs. 6,196/ha) between 2009-10 to 2013-14.
Consequently, the average revenue earned from these clonal plantations has grown
exponentially by 362% (from Rs. 64,375 - Rs. 297,408/ha) contributing significantly (80%) to
the growth in the total revenue of the corporation from Rs. 12.54 crore to Rs. 114.78 crore
during these five years. The present annual requirement of pulpwood in the state is to the tune
of 20 lakh MT, of which the bulk (~90%) is supplied by the farmers. Though the SFDCL and the
farmers both grow Eucalyptus clones, the product gets differentiated as the age of the farmer's
crop is three years while the corporation follows a longer rotation cycle of six years, resulting in
mature wood which has a longer fiber length with better mechanical properties. Therefore, the
corporation's pulpwood commands a premium compared to the farmer due to its higher
suitability in paper making coupled with ease of bulk procurement.
The context of the present case is linked to the Eucalyptus plantations put up for auction by
SFDCL in October 2015. Before this auction could take place, the Department of Industries
allotted the pulpwood to M/s AB Industries Limited (ABILT) to revive this mill, and the
corporation was asked to come up with a discovered price. In order to determine this price, the
state government engaged the services of a consultancy institute. The consultancy team
conducted a literature review to assess the various pricing methods, namely cost-based,
competition-based, customer based and statutory. Then the team travelled to site and interacted
with the various stakeholders. and visited the corporation grown and farm forestry Eucalyptus
plantations. During this immersion visit, the methodology for the study was also discussed and
finalized. Amongst the various pricing methods, the statutory pricing approach was followed as
it was mandated under the State Forest Produce (Fixation of Selling Prices) Act 1989 and Rules
framed in 1991. This Act gets invoked when the Government enters. into an agreement or
arrangement for supply of forest produce. In this case, the Industries Department had allotted
the Eucalyptus pulpwood to ABILT, to revive this sick unit. This Act and the Rules provide a step
by step approach to determine the selling price using a blended approach. It mandates that the
price fixed should not be less than the projected production costs, the auction price obtained by
the corporation over the past 30 months needs to be considered while keeping an eye on the
recent market trends. Following this field visit, data analysis was carried out using the primary
data comprising of rates obtained in the past auctions by the corporation, auction price obtained
by corporations of adjacent states, selling price of the farmers and other relevant documents
provided by SFDC The production cost was assessed using the Discounted Cash Flow (DCF)
method to project the past plantation costs to arrive at the Net Present Value (NPV) of Rs.

2
Indian Institute of Forest Management, Bhopal
2,709/MT. The customer-based pricing was obtained from the e-auction held by the corporation
in 2013-14, fetching a price of Rs. 6,196/MT. During the period 2009-10 to 2013-14, the price
of farmer grown and corporation grown Eucalyptus pulpwood showed an excellent correlation
of 0.94. The goodness of fit statistical model of regression was run using the price of farm-grown
Eucalyptus from 2009-10 to 2015-16 as the independent variable, and analysing the eleven
regression functions in SPSS (ver. 16). The price estimated fell in three clusters namely, between
Rs. 5,871-Rs. 6,422 (-5.25-3.65% increase), between Rs. 6,848-Rs. 7,161 (10.53-15.57%
increase) and Rs. 8,169-Rs. 12,128 (31.84 - 95.74% increase). During the open sales in 2013-14,
the corporation obtained an average price of Rs. 6,196/MT. Over the last two years, i.e. 2014-15
and 2015-16 the global pulpwood prices in rupee terms are steadily increasing, the farmer's
price too had registered a 23% rise from Rs. 3,900/MT to Rs. 4,800/MT, the corporations' price
shows an excellent correlation (0.94) to this farmer's price and the maximum price of a few lots
obtained during the 2013-14 auction was Rs. 6,901/MT. Triangulation of all these related
datasets indicates that the power and linear functions provided the most realistic fit, estimating
the price of the corporation grown Eucalyptus in the range of Rs. 6,848/MT - Rs. 7,161/MT.

During 2014-15, the adjoining State Forest Development Corporation Limited (FDCL) auctioned
its pulpwood to the paper mills at Rs. 6,250/MT. Taking a cue from this, and given that we have
to recommend a discrete price, a heuristics was evolved that the estimated price has to be closer
to the adjacent state's forest corporation's price. Hence, the price of Eucalyptus pulpwood
owned by the State Forest Development Corporation Limited (SFDCL) having a volume of 2.85
lakh MT from the 2008 and 2009 plantations series is recommended at Rs. 6,848/MT (10.52%
rise over two years) for the supply year 2016-17 starting from 1st April 2016.

Case Questions:
1. Assuming you are a client to the study what issues you may clarify?
2. Do you recommend any other pricing approach?
3. How can you assess the competitive position of corporation and farmers as the corporation
has commercial as well as development mandate?

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Indian Institute of Forest Management, Bhopal
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Indian Institute of Forest Management, Bhopal