Jute industry likely to lose Rs 1,000 cr on demand fall

Govt which purchases jute bags at an average price of Rs 52,000 a tonne, has reduced demand

The jute industry fears losing about Rs 1,000 crore due to a drastic cut in the demand for its bags this kharif season. According to industry sources, state food procurement agencies are backing out of commitments, leading to the government curtailing the projected demand. The stand of food procuring agencies follows alleged irregular supplies, high costs and the poor quality of jute bags.

Every year, the Food Corporation of India procures 35-40 per cent of jute bags production (0.8 million tonnes, or mt) on behalf of states such as Punjab, Haryana, Chhattisgarh, Madhya Pradesh, Uttar Pradesh, Odisha and Bihar. The industry's installed capacity is about 1.5 mt. Though 75 per cent of jute mills are located in West Bengal, the state doesn't have a policy to procure jute bags. Indian Jute Mills Association (Ijma) Chairman Raghav Gupta wasn’t immediately available for comment.

Sanjay Kajaria, managing director, Hastings Jute Mill, and former Ijma chairman said, “The cut in demand is bound to hit the industry. In fact, the impact is already visible in prices, which have dropped 13.46 per cent---from Rs 52,000 a tonne to Rs 45,000 a tonne. Also, hessian (or gunny cloth) prices have fallen 7.69 per cent, from Rs 65,000 to Rs 60,000 a tonne. It seems the government has no sympathy for jute bag manufacturers.”

The fall in demand is also expected to lead to production cuts and job losses. About 4,00,000 industrial workers are engaged in jute mills. An estimated 9.5-10 million bales (a bale is 180 kg) of raw jute are expected to be produced this year. The sector is already burdened with a stock pile of 2.7 million bales.

The industry apprehends most mandatory jute packaging orders would be trimmed, resulting in further losses. Last year, orders were cut 10 per cent for foodgrain and 60 per cent for sugar, in favour of plastic bags. This year, the fall is expected to be 10 per cent and 80 per cent for foodgrain and sugar, respectively. The jute/fibre policy of 2011 has recommended phasing out the mandatory jute packaging order---Jute Packaging Materials Act, 1987---by the 14th five-year Plan. According to the Act, it is compulsory for state procurement agencies to pack sugar and foodgrain in jute bags.
DEMAND FALL: ITS REPERCUSSIONS

• Demand for jute bags cut by 0.16 million tonne his kharif
• Food procuring agencies complain of poor quality jute bags, high costs and irregular supplies
• Jute bags prices slump on demand cut
• Industry fears production cut and job losses