Jute firms' scrips surge on hopes of demand spike for bags

Govt makes packaging of foodgrains and sugar mandatory up to 90% and 20% respectively this year

Share prices of jute processing companies jumped up to 17 per cent on Thursday, on expectation of a spurt in demand for bags in the coming rabi harvesting season.  The share price of Gloster rose 16.6 per cent to close at Rs 652.20 and of Cheviot by 8.3 per cent to Rs 1,020.25 apiece. The scrip of jute bag making companies have doubled in the past three months.

The Cabinet Committee on Economic Affairs had on December 9 re-approved mandatory use of jute in packing of grain for Jute Year 2015-16 (July 1, 2015 to June 30, 2016), to support ailing mills, largely in Bengal and Assam. Jute packing has been made mandatory for at least 90 per cent of foodgrain and 20 per cent of sugar production. The decision will provide relief to 370,000 workers employed in jute mills and ancillary units, beside supporting the livelihood of 250,000 farm families. The industry also makes the point about jute being natural, biodegradable and a reusable fibre.

Output is actually likely to fall 15-20 per cent this year, due to unseasonal rain in major producing regions. Last year, total production was estimated at five million tonnes. Bangladesh, a major producer of jute bags, banned their export to India in early November.  Under the Jute Packaging Materials (Compulsory use in Packing Commodities) Act, 1987, the government may consider and provide for the compulsory use of jute packing material in the supply and distribution of certain commodities. It may also relax the ambit.