Jute mill owners want government procurement of crop

The scrapping of high-value currency notes has halted the trade in raw jute and mill owners want government-run Jute Corporation of India (JCI) to procure the crop.
 

Traders say they are not in a position to procure the new crop or take delivery of raw jute booked earlier by paying an advance, as they face a paucity of funds.

Upon its arrival in November till the end of January, raw jute worth Rs 415 crore is transacted every year, says a review of market trends between 2013-14 and 2015-16. The estimate is that nine million bales (a bale is 180 kg) are available this year but in the wake of demonetisation, there are projections of scarcity.

“This is an unprecedented situation. If allowed to spin out of control, it will force mills to reduce shifts or shut down,” said a leading owner. For, squeezing of note supply to a largely cash-driven industry would mean the stock arrival in the market would be delayed. Speculation is already rife that this might spur hoarding of raw jute.

The industry has drawn parallels with the situation in 2005, when there was an acute fall in raw jute arrival. At the time, JCI began procurement; this boosted prices. So much so that the Union textiles ministry capped prices via a notification in December 2005. The cap continued until the end of June 2006. Indian Jute Mills Association (Ijma) is lobbying with the West Bengal government to repeat the experiment.

Ijma chairman Raghavendra Gupta, in a letter to West Bengal labour minister Moloy Ghatak, has said, “Most jute mill companies do not have raw stock beyond a month's normal production. Due to demonetisation of high currency denomination bank notes and limits on withdrawal from bank accounts, there is a shortage of cash in the system. If JCI purchases various grades of raw jute in keeping with the standards prescribed for manufacturing jute bags for supply on government account and passes it on to mills, that would be acceptable to the industry.”

Ijma suggests the ministry of textiles provides adequate capital to JCI for this. An industry estimate pegs the need at Rs 400 crore.

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