Development of management and cost accounting of wood harvesting in the Republic of Karelia

Abstract

Tyukina, O. 2010. Development of management and cost accounting of wood harvesting in the Republic of Karelia. Dissertationes Forestales 106, 131 p. Available at http:// www.metla.fi/dissertationes/df106.htm. During the Soviet Era, in the Karelian Autonomous Soviet Socialist Republic, the harvesting of wood was mainly arranged by state logging companies called lespromkhoz. The logging method then was the tree-length (TL) method, which was targeted for full mechanisation. A centralized management system with extremely centralized decision making was used in the whole of the Soviet Union. In this planned Soviet economy, the volumes of wood harvested and the roundwood prices were set by the Ministry of Forestry and Forest Industries, and costs were set according to standard, internally agreed upon, methods. In the early 1990 s, during the period of transition from the Soviet planned economy to the market economy the logging industry of the newly established Republic of Karelia fell into economic crisis. Wood harvesting in most of the Karelian logging companies had become unprofitable; the major reasons were cost increases and other cost factors due to the markets. In addition, the outdated technology and undeveloped infrastructure also affected the profitability. Many of the state owned lespromkhozes changed ownership, becoming joint stock companies, and many small logging companies were established. Within the context of drastic economic and societal transformations, this study describes and analyses both the changes in the wood harvesting management systems in the Republic of Karelia and the theory and practice of cost accounting for wood harvesting in Karelia and the Russian Federation. At present in Russia, and specifically in the Northwest, both the cut-to-length (CTL) and tree-length (TL) harvesting methods are commonly used. During the last 10-15 years, modern CTL technology has accounted for an increasing share of the harvesting. While there has also been some modernisation in TL technology, the traditional machines and methods still prevail. Harvesting cost calculations for the processes that are involved in the cutting areas and in the delivery to the domestic wood processing industry, or for export, were made for both the TL and CTL methods. All harvesting operations in the forest, as well as work at the logging terminal, are divided into the main activities along a logistic chain. Wood harvesting cost calculations for the TL and CTL methods are based on several work options, including the use of Russian and Nordic mechanisation, as well as manual methods. As part of the theory of cost-price accounting, the Russian method of cost-price and the Nordic method of wood harvesting cost calculation are studied and compared. Similarities exist in the cost categories of both methods, in that cost accounting is divided into fixed and variable costs, but there are also significant differences. One of the differences between the two is that an exchange value for machinery is taken into account in the Nordic method, but not in the Russian method. Cost accounting models for 2000-2005 indicate that the cost for harvesting with the CTL and TL methods in Karelia have increased by 2.5 times in real terms. The wood harvesting costs depend on the harvesting method and roundwood transportation distance; in 2005, for the CTL method, they ranged from 11-35 €/m, and for the TL method, they were from 13-42 €/m. However, it seems that the increasing use of the CTL method with Scandinavian technology in many cases is as much due to the new forms of organisation and management of harvesting work, as it is to cost calculations.