The bào reading is the carpentry tool and the action of shaving with it: 刨子 (a plane), 刨床 (planing machine), 刨花 (wood shavings), 刨冰 (shaved ice). For digging, use páo.
刂 on the right is the side form of 刀, a single-edged blade. As the indexing radical it marks 刨 as a scraping or cutting action, grouping it with 刻 to carve, 削 to peel, 切 to slice.
包 on the left supplies the sound, bāo shifting to páo (and to bào in the carpentry reading). Same phonetic feeds 抱 to hold, 跑 to run, 炮 cannon, 泡 bubble.
