Jute industry stares at nearly Rs 8 billion loss on dilution plan

The decision by the Ministry of Consumer Affairs & Food Distribution to approve dilution of 258,000 bales of jute bags (one bale is 180 kg) for the kharif marketing season of FY18 and Rabi marketing season (RMS) of 2018-19 has unsettled the jute industry.

Total packaging requirement for RMS is pegged at 11.26 million bales and the dilution proposed is 10 per cent of this requirement.

The dilution follows an approval from the Ministry of textiles earlier for relaxing the mandatory jute bags for food grains in favour of high density polyethylene (HDPE) and polypropylene (PP) bags. 

Total requirement of jute sacking bags for the two agriculture seasons is pegged at nearly 1.7 million bales. If both the seasons are included, the dilution comes to 15 per cent.

The dilution plan is projected to wipe out nearly Rs 8 billion business for the jute industry. Government purchases form the bulk of the industry's supplies of B Twill bags used in packing food grains.

"The dilution plan is unfortunate. This has been announced despite the jute industry being fully capable of meeting the government demand for packaging. De-reservation to make way for plastic bags would force jute mills to cut production”, said an industry source.

After the approval in dilution, the Ministry of Consumer Affairs & Food Distribution has made the necessary modifications in supply plan for RMS 2018-19. It has urged state governments and Food Corporation of India (FCI) to place the indents with funds in time for jute bags  and HDPE/PP bags as per the revised supply plan. States would also take all necessary steps to ensure that procurement operations are not impacted.

Data by the Jute Commissioner's office shows that the backlog position (as on February 25) in packaging material for Rabi crop stands at 312,680 bales. In case of kharif crop, the backlog is 83,375 bales.