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Jute mills defaulting on supplies of bags to Food Corporation of India (FCI) could face a two-year ban if the recommendations of the Jute Commissioner (JC) are accepted. The ban was recommended by the JC at the previous meeting of the standing advisory committee (SAC) on jute recently. He noted some millsregularly delayed or defaulted on supplies.
"Around 15 mills might face the ban. The JC has also favoured inclusion of a higher penalty clause in the contract between the mills and the director general of supplies and disposal (DGSD)," said a source in the JC office. The DGS&D would give an action taken report to the government. The jute industry faces accusations of supplying poor quality jute bags. The Competition Commission of India is probing the industry on its practices.
Annually, FCI procures 35-40 per cent of all jute bags. The current price of one tonne of jute bags is Rs 56,000 or Rs 3,700/100 bags. FCI purchases the bags on behalf of state food procuring agencies for packing foodgrain. Every year, the government spends around Rs 5,600 crore to purchase the bags. The jute industry manufactures around 1.1 million tonnes of bags, against an installed capacity to produce 1.5 mt.
At the SAC meet, most stakeholders were against continuing with 100 per cent use of jute bags for packing foodgrain and sugar in 2013-14. The JC suggested de-reserving the mandatory use under the Jute Packaging Materials Act by 10 per cent in the case of foodgrain and 80 per cent in the case of sugar packing.
Last year, irregular supply of jute bags had led to law and order problems in Madhya Pradesh. The Haryana and Maharashtra governments also favoured use of plastic bags, due to irregular supply. Jute bag prices are fixed on a 12-year formula worked out by the Tariff Commission. During this period, the government disallowed cost escalation on half the items necessary for production of bags.
These include stores, repairs, overhead, other packing, depreciation, interest and return.
