TFCA recently provided a short submission to the Pulp and Paper Industry Strategy Group (PPISG) to ensure that critical supply chain issues are duly considered by this group.  Details of this submission are reproduced below.

Introduction

 

The Tasmanian Forest Contractors Association (TFCA) represents a number of businesses responsible for harvesting and transporting wood products throughout Tasmania.   The majority of TFCA’s members are small to medium business owners and our membership alone is responsible for approximately 80% of the woodflows throughout Tasmania.

 

Whilst we are aware that TFCA represents businesses involved in upstream activities (as defined in the issues paper), we believe it is critical that harvesting and haulage issues are duly considered by the PPISG because our situation will impact on future viability of the pulp and paper sector.  In many respects, TFCA represents a sector that is often forgotten as processors strive to establish new markets as well as maintain existing sales.  Yet our ability to sustainably deliver the requisite timber in a cost efficient manner will either make or break market opportunities.

 

The myriad of issues confronting the harvesting and haulage sector are as follows:

 

1.            Forest Resources

 

In Tasmania alone, we are seeing less reliance on the native forest resource coupled to an increasing reliance on regrowth and plantation varieties.  There are significant differences associated with the harvesting task and the resultant economies of scale will lead to fewer businesses with arguably larger investments.  Unfortunately there is no strategic plan to achieve this and whilst TFCA has been promoting solutions for at least three years, the lack of support from other industry elements has significantly undermined the contracting sectors’ sustainability. 

 

If you then add in the effects of the Global Financial Crisis especially as this relates to financial security, then you have a sector which cannot perform at current levels let alone at any new or revised approaches associated with increased plantation harvesting.

 

2.            Energy & Climate Change

 

The forest contracting sector is current lobbying against a difficult aspect of Federal Government Policy relating to the proposed fuel tax rebate.  It is our understanding that the current Government policy provides for the following outcomes:

 

		Forestry Businesses		Agriculture Businesses		Fisheries Businesses
		Harvesting	Haulage
Private Roads	Existing Tax Rebate (approx 38 cents)	Yes	Yes	Yes		Yes
	CPRS Fuel Tax Credit	No	No	Yes		Yes
Public Roads	Existing Tax Rebate (approx 17 cents	Roading works – Yes	Yes	Yes		Yes
	CPRS Fuel Tax Credit	No	Yes	Yes		Yes

Vehicles under 4.5 tonne qualify for the on-road tax rebate whilst operating on private roads, thus adding a further layer of complexity and management.

 

In simple terms, if you are operating either a combined harvesting and haulage business and/or a mixed agriculture and forestry business then you will have a significant amount of red tape to deal with thus resulting in huge compliance costs.

 

The impact of this current policy on the pulp and paper industry should not be underestimated because it will add potentially add millions to the costs of harvesting and haulage Australia wide.  In short, the pulp and paper industry will need to find ways of funding this because, as noted earlier, there exists very little capacity for harvesting and haulage businesses to absorb this.

 

3.            Regulation

 

TFCA notes the recent Tasmanian State Government announcement to review its Fair Contracts Code Advisory Note as well as evaluate the Victorian Owner Drivers and Forestry Contractors Act.  These legislative instruments are only necessary because of the actions of some processors to consistently impose arrangements such as ‘no minimum quotas’.  The absence of any effective dispute resolution process only complicates matters for contractors.  There is no doubt that if all processors adopted suitable and fair supply chain management mechanisms then the calls for legislative protection would diminish.  Unfortunately TFCA cannot see this occurring across the entire industry and therefore we, along with other like minded representative bodies, will continue to lobby hard for increased contractual protections.  One must also consider that some processors have managed to secure long term wood supply agreements; therefore the reluctance to offer fair and reasonable arrangements to contractors is certainly concerning.

 

It is worth noting at this juncture that efforts are underway to introduce safe rate systems for transport owner drivers.  Once again, the impetus for this lies solely in the actions of some processors who fail to support all elements of their supply chain.  The likely introduction of safe rate setting mechanisms by the current Federal Government will certainly change the heavy vehicle transport framework this necessitating changes by those receiving the goods.

 

4.            Transportation Costs

 

In the previous section, TFCA alluded to some of the future cost drivers within a regulatory framework.  There are many others that the PPISG needs to be cognisant of because of their likely impact on transportation costs.  Some of these are as follows:

 

• Continuing national rollout of Compliance and Enforcement legislation encompassing, amongst other things, chain of responsibility and reasonable steps defence requirements
• Increasing focus on managing driver fatigue, which in turn is underpinned by model legislation that is also being rolled out nationally
• National Heavy Vehicle Regulatory Reform to bring licensing under a national banner
  • Whilst a positive initiative, this will not address the significant last mile issues that haulers confront on a daily basis, ie driving certain vehicles through local council areas; therefore any national gain could well be undermined by increasing Local Government access problems
• National rollout of the Intelligent Access Program including the linking of vehicle telematic arrangements to high productivity vehicle access

 

Summary

 

Whilst TFCA certainly welcomes the efforts of the PPISG, we strongly encourage the Group to take a holistic view to matters impacting on the pulp and paper industry.  Any move towards ignoring or even sidelining supply chain issues is fraught with danger and will result in a fractured industry that struggles with the concept of supporting the ever important pulp and paper opportunities.

 

TFCA welcomes any opportunity to provide clarity and background to our comments above.

Tagged as: TFCA PPISG Submission