2.59 million bales the optimum capacity for jute bags in 2014-15

The Union textiles ministry is planning to freeze capacity of B Twill jute bags based on the recommendation made by Jute Commissioner Subrata Gupta, who had advocated freeze in capacity since internal consumption of jute bags was lower than the actual capacity. The jute bag capacity likely to freeze at 2.59 million bales (one bale is 180 kg) for 2014-15.

The ministry stated in its draft Cabinet note that for the purpose of supply of jute bags under the Jute Packaging Materials Act (JPMA) 1987, the capacity of jute mills (existing and those that may come up in the future) may be frozen at 2.59 million bales, which is the average of B Twill supplied by the industry over the last three years for 2011-12, 2012-13 and 2013-14.

The B-Twill gunny bags are primarily meant for government supply through the public distribution system to pack food grains and sugar. Under the plan, in future, the capacity of a jute mill will be assessed according to its production strength as on January 1, 2014. The government will ignore fresh capacity demands made by jute mills.

Since 2012, the government has been placing orders for jute bags based on commitments from the jute industry.

The government has written strong letters against the industry for not supplying jute bags and diverting them to the open market for selling at higher prices. Two years ago, the government had blacklisted 14 jute mills.

Sanjay Kajaria, a leading jute mill owner and former chairman of Indian Jute Mills’ Association stated that the industry has got enough capacity to not only meet 100% bag requirement by government procurement agencies for food grains, but for meeting 100% requirement of jute bags by sugar industry as well. The overall capacity to manufacture and supply sacking by industry is proposed to be frozen at an artificial lower level, which is contradictory in itself. It seems that the possible impact on the JPMA dilution has remained unforeseen. In 2012 and 2013, the government had partially diluted the JPMA and had made similar recommendations for partially implementing it in 2014.

The jute industry supplied 700,000-800,000 tonne of jute bags to the government valued at about Rs 5,000 crore at the rate of Rs 50,000-55,000 a tonne.

Total production of jute material over the past five years from 2009-10 to 2013-14 has varied from 1.32 million tonne to 1.52 million tonne, averaging 1.51 million tonne, while average internal consumption had been 1.33 million tonne.

The latest move to freeze jute bags capacity has evoked strong opposition within the jute industry.