Date:14/02/2006 URL: http://www.thehindubusinessline.com/2006/02/14/stories/2006021400941200.htm

Back Industry in a fix over price ceiling for raw jute

Kohinoor Mandal

Kolkata , Jan. 13

THE raw jute price ceiling of Rs 1,468 a quintal announced by the Union Ministry of Textiles in December last, has pushed the jute industry in a tight corner.

On one hand, the industry has to meet the deadlines fixed for the Government food bag orders, failing which there is the threat of dilution of the mandatory packaging orders. On the other, there is an acute shortage of raw jute in the open market at the price prescribed by the Jute Commissioner's Office.

Industry sources said raw jute was available only at prices higher than the ceiling price. "Any one can buy raw jute at a price of around Rs 1,700-1,800 a quintal but it would be an illegal transaction because the price is fixed at Rs 1,468 a quintal," sources said.

Still, the industry is forced to buy raw jute at higher prices as there is a huge pressure of Government orders. It was learnt that the industry is already lagging behind in the supply schedule.

"We will have to run the mills. If we fail to meet the supply deadlines, the Government is threatening to dilute the mandatory orders. So, we are forced to buy the fibre at higher prices," a mill owner said.

The owner claimed that the industry was selling jute bags at an un-remunerative price.

According to him, the industry was losing approximately Rs 3,000 on every tonne of jute goods sold as the Union Government was considering the raw jute ceiling price as the input cost for calculating the final product price.

The jute industry is now requesting the Union Government to remove the price ceiling. It feels that once it is removed the price would decline to normal levels and the fibre would be easily available too.

"Let the market forces determine the actual price of the raw jute. There is no point in fixing it at an artificial level through a Government order. It is affecting everyone in the sector," the mill owner argued

However, it is on the repeated requests and insistence of the industry that the Union Textile Ministry thought it fit to declare the ceiling price. The industry had been pressing for this ceiling price from the middle of 2005.

The industry had also blamed Jute Corporation of India, a central public sector unit, for buying huge volumes of raw jute.

According to them, though the Union Textile Masked JCI to buy one lakh bale of raw jute, the central organisation ended up buying four times the volume.

"It resulted in a huge rise in the raw jute prices. So, we mooted the idea of a raw jute price ceiling but the Union Government delaying in making the announcement. As a result, the situation changed and price ceiling has actually boomeranged at us," the mill owner said.

Last week, some of the leading mill owners representing the Indian Jute Mills Association were in Delhi requesting top officials of the Union Textile Ministry to withdraw the raw jute price ceiling.

After returning to the city, one such mill owner appeared anything but optimistic. "It is unlikely that the Government would remove this order soon," he said.