The Jute Commissioner has initiated the process of fixing a ceiling on the price of B-Twill jute bags after getting a go-ahead from the Union textiles ministry.
The price ceiling would be close to Rs 80,000 a tonne, which represents the average price prevailing in December 2015. This is the maximum price at which government procurement agencies can buy the sacking bags to pack food grains. This is the first ever occasion when prices of finished jute goods are going to be capped.
A decision to cap price of B-Twill jute bags has been taken considering the runaway hike in prices of raw jute prices. Raw jute prices which opened at Rs 41000 per tonne at the beginning of this crop season in August last year, have spun out of control touching an all-time high of Rs 57,000 per tonne. The spiraling prices of raw jute triggered a hike in B-Twill bags to the level of Rs 80,000 per tonne, while Hessian prices moved beyond Rs 100,000 a tonne.
"The price ceiling (on jute bags) is yet to be notified”, said Manish Poddar, chairman, Indian Jute Mills Association (IJMA), refusing to elaborate.
Though the Jute Commissioner fixed the stock holding limits of raw jute for the mills, it failed to contain rising prices. The unprecedented hike in prices was mainly due to hoarding by some mills and also manipulative practices by traders. Even the de-hoarding drive by the West Bengal government did not help to check the rampant price rise.
Taking note of the situation, the Textiles ministry called for fixing the cap on B-Twill bags prices.
“Due to the present steep hike in price of raw jute, the price of jute bags has also increased resulting in higher burden of subsidy to be given by the central government for purchase of jute bags. Therefore, in order to check the possible price rise of jute bags and reduce the burden of subsidy on central government, it has been requested that the prices of raw jute or B-Twill jute bags be capped at the level of average price of November 2015”, S R Gaikwad, director (jute), textiles ministry wrote in a recent letter to Jute Commissioner Subrata Gupta.
Accordingly, the Jute Commissioner has come out with a notification stating that the price declared in December 2015 for B-Twill sacking (for both 665 gms and 580 gms sacks of Type-A and Type-B) would be taken as ad hoc price for January 2016 till a decision regarding price capping is taken.
Any decision to cap B-Twill bags prices is bound to hit the bottom-line of the mills, said a leading jute mill owner.
“The ad hoc price of B-Twill jute bags has been pegged factoring in the average price of TD-5 variety of raw jute of Rs 45,000 per tonne. But with raw jute prices ruling at Rs 57,000 a tonne, most mills would struggle to sustain operations with this deficit of Rs 12,000 per tonne”, he said.