Jute bag makers losing Rs 200 cr every year on outdated pricing formula

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Jute bag manufacturers are losing over Rs 200 crore every year due to non-revision of an 11-year-old pricing formula of the Tariff Commission.

Adding to the woes of the ailing jute industry is the recent decision of the Jute Commissioner’s (JC’s) office to strike down the industry’s demand for revising jute bag prices — a move that is bound to affect all 55 working jute mills in West Bengal.

“All jute bag manufacturers in West Bengal are running into losses because of the obsolete pricing formula and our mill is losing around Rs 5,000 a tonne. If jute bag prices are not revised, it will only push the industry into further sickness,” said Sanjay Kajaria, owner of Hastings Jute Mill and former chairman, Indian Jute Mills Association (Ijma).
 

THE STORY SO FAR

• On the recommendation of the Tariff Commission, the textile ministry recommended a formula change to the Cabinet Committee on Economic Affairs. But, according to the Jute Commissioner's (JC) office, there is no need of a price revision at this stage
• According to the estimates of the JC office, wage cost has reduced by Rs 1,596 a tonne and hence, current prices of jute bags are remunerative
• Jute bag price, which is at Rs 55,979 a tonne, is determined according to Tariff Commission's price formula of 2001
• The industry holds the Tariff Commission's formula of 2001 as obsolete

“The jute industry is supported by the government but it seems the government is not willing to revise jute bag prices. The industry has already approached both the Central and state governments, but our concerns have not been addressed”.

Jute bag price, which is currently at Rs 55,979 a tonne, is determined as per Tariff Commission’s price formula of 2001.

“Obviously, we are making losses. On two earlier occasions, the Union textiles ministry has rejected the push for price revision. But, the industry should not lose hope as a new study is under way. The study is being done by the Tariff Commission. Once it is done, the recommendations will be submitted to the Union ministry of textiles, which will take a call on revising jute bag prices,” said Manish Poddar, chairman Ijma, who owns the Budge Budge jute mill.

The jute industry is protected under a central legislation, the Jute Packaging Materials Act, 1987, that provides for mandatory packaging of sugar and foodgrain in jute bags by procurement agencies to an extent of 100 per cent.

On the recommendation of the Tariff Commission, the Union ministry of textiles recommended a formula change to the Cabinet Committee on Economic Affairs (CCEA). According to the JC office, there is no requirement of a price revision at this stage.

According to the estimates of the JC office, wage cost has reduced by Rs 1,596 a tonne and hence, current prices of jute bags are remunerative.

Data from the JC office reveals that to produce one tonne of jute bags, 38.32 man days are needed. The price calculation is based on the productivity norms of the erstwhile Jute Manufacturers’ Develo-pment Council which had estimated that 42.9 man days were needed to produce a tonne of jute bags.

Moreover, data furnished by 13 jute mills showed that on an average, 40 persons are required to produce a tonne of jute bags.

The industry, however, holds the Tariff Commission’s formula of 2001 as obsolete.

It may be noted that on February 9, 2011, the Union ministry of textiles had instructed the JC office to recalculate the fixed price components of the 2001 Tariff Commission Report, linking it to inflation. The Central government had earlier set aside a revised report of the Tariff Commission submitted in June 2009 as it was allegedly found to be manipulated.

A section of the industry has already moved the court against the government for non-implementation of the Tariff Commission's price formula of 2009. The JC office had carried out the revised calculation on the Wholesale Price Index (WPI) series of 1981-82, 1993-94 and 2004-05, gathered from the Economic Adviser’s office of the Union commerce ministry.