Jute packing rule might be relaxed this week, after industry protest

However, Jute mills could take a loss of Rs 2,000 crore in 2017-18, if the order is relaxed

A proposal by the Department of Food & Public Distribution (DFPD) at the Centre to further relax the mandatory packaging norms for jute bags is set to erode the market for the industry.

The department has pushed for dilution of foodgrain meant to be packed in jute sacks from 90 per cent currently to 75 per cent for the 2017-18 season. In the case of sugar, the proposal is to completely lift the compulsory packaging order from 20 per cent at present.

DFPD's concern stems from capacity constraints in the jute industry. These issues are to be discussed at a meeting coming Thursday, to recommend norms for packaging for 2017-18.

The industry enjoys a cushion from the Jute Packaging Materials Act, which provides for mandatory packaging of sugar and foodgrain in jute bags by government procurement agencies. A dilution is allowed each year after taking stock of the market situation.

B Twill jute bags, heavily used in packaging, almost lean on government procurement and have no alternative markets. The latest proposed relaxation could mean a loss of Rs 2,000 crore to the mills for 2017-18.

The jute industry contends it can fully meet the packaging requirement for both foodgrain and sugar. This year, raw jute production is pegged at around eight million bales (a bale is 180 kg). Additionally, there is surplus raw jute stock of about two million bales of the previous season, unutilised due to demonetisation woes.

"The whole thing is an artificial crisis. When there is adequate production of raw jute and commensurate availability of jute sacking bags, there is no ground for dilution. The industry is facing problems due to change in purchase agency and delay in placement of indents," said a leading jute mill owner.

However, DFPD says in the earlier rabi marketing season, the requirement of government agencies could not be met and dilution up to 40 per cent had to be allowed. It feels a shortage of jute bags has become a regular feature, with an alternative packaging arrangement in HDPE (high density polyethylene) bags.

"Limited production capacity of jute mills and decrease in production of raw jute escalates the prices of jute bags. Further, concentration of jute mills in the eastern part results in logistics problems and huge expenditure is incurred for transportation", Prashant Trivedi, joint secretary (jute) in the ministry of textiles, said in an official note.