Volatile jute prices trigger closure of 14 mills

The surge in price of raw jute has led to closure of 14 mills in West Bengal, those without adequate working capital. An estimated 70,000 workers are out of employment.

Raw jute is now Rs 53,000 a tonne, a record high and double the Rs 26,000 a tonne in the same period last year. The reason is a forecast of million bales less in output, plus suspected price manipulation by some mill owners and traders.

"Some jute mills, speculators and traders have hoarded raw jute and created an artificial crisis in the market. The lack of de-hoarding drives has worsened the situation, despite fixing of stock limits of raw jute for mills," said a mill owner.

Jute commissioner Subrata Gupta feels more mills are on the edge of closure, since they lack the financial muscle to sustain operations. He has recommended closure of weak mills and cut in jute bag production.

Manish Poddar, chairman of Indian Jute Mills Association (Ijma) said: "Of late, 14-15 mills have shut operations. It is difficult to say how many more face closure."

In his status report, 'Raw Jute Crisis for 2015-16', the jute commissioner says the raw variety's prices are significantly impacted by the government's purchase of sacking. In recent years, the government has purchased almost 60 per cent of jute goods produced.

Assuming raw jute output at six mn bales (or 1.08 million tonnes) this year, the commissioner has predicted a shortfall of 180,000 tonnes of jute goods even if all the raw jute is used. Composite mills would have to cut production, either by suspending operations or having a reduced number of shifts.

There are 50-odd mills working now, mostly in Bengal. A few of mills have the financial strength to continue operations in this situation but most of the others need working capital.

Taking note, the Union textiles ministry has allowed a dilution of 134,000 bales (a bale is 180 kg) for foodgrain packaging (grain has to be packed in jute, by government order). A further dilution of 30 per cent is under consideration, as Ijma has said the industry would not be in a position to supply more than 200,000 bales a month from December.

For the next kharif season, the food ministry can take a decision not to requisition jute sacking (in April and May 2016). The commissioner feels this step would help curb excessive speculation in the raw jute market.