CACP overhauls jute MSP fixing mechanism

The Commission for Agricultural Costs and Prices (CACP) under the agriculture ministry has radically changed the half-century old annual pattern of calculating Minimum Support Price (MSP) of raw jute.

Previously, CACP calculated the MSP based on the existing support price of TD 5 grade raw jute produced in Assam.

Under the new system, MSP is determined on the overall demand and supply of raw jute, trend in the domestic and international price, cost of production and inter-crop price parity with the paddy crop and the terms of trade prevailing with non- agriculture products and industries.

According to CACP report, the earlier model of determining MSP, based on Assam output, has lost its relevance as jute cultivation has expanded to newer areas in the country.

The share in production of raw jute from Assam has come down to six percent. West Bengal produce almost two-third of the country's raw jute. As per CACP, states that are not close to Assam were facing problems in terms of higher transport price. For half a century, barring jute, all commodities had a uniform pattern of calculating MSP.

Moreover, in the old pattern low grades of jute received higher prices at the cost of higher grades. Over the past few years, prices of higher grades of raw jute like TD 3, 4 and 5 have come down while lower grades like TD 6, 7 & 8 received higher discounts.

For 2013-14, CACP fixed MSP of raw jute at a flat rate of Rs 2,300 / quintal. Last year, the Commission increased MSP by Rs 525/quintal over the Assam grade. As each jute growing state already had different MSPs, it resulted in difference in prices. India produces almost 1.1 million bales of raw jute.

The move had placed the jute industry in problem. In each agriculture season, the government purchases jute bags from the industry to pack food grains. With a flat rate of MSP, the jute industry has very little scope to demand higher prices on its bags. The government has not revised bag price formula since 2001. The industry had been crying hoarse over it.

The earlier practice continued for 43 years since the formation of the Jute Corporation of India in 1971. JCI undertakes MSP operation during distress sale of raw jute by the cultivator.