CCI indicts jute industry for monopolizing and manipulating prices

The Indian Sugar Mills Association, All India Flat Tape Manufacturers Association and National Federation of Co-operative Sugar Factories had petitioned the Commission against the Indian Jute Mills Association (IJMA) and Gunny Trades Association (GTA), alleging rigging of jute bag prices on August 2 2011. The Competition Commission of India (CCI) has indicted the jute industry for monopolizing and manipulating prices of jute bags unjustifiably.

In the final investigation report, running into around 7,000 pages, the director general, CCI has pulled up the jute industry for violating anti-monopoly provisions of Section 3 (3) (a) of the Competition Act of 2002. The report has been divided into three parts, consisting of a main section and two supplementary sections.

The jute industry has been given time to reply orally latest by February 20, 2014, failing which it would be fined and penalised by the Commission and legal action would be initiated. CCI had earlier fined the cement sector heavily for violating anti-monopoly provisions.

In another blow to the jute industry, CCI has recommended freeing the sugar industry from the control of mandatory purchase of jute bags, without naming the Jute Packaging Materials Act (JPMA), 1987. This is in line with the suggestions already made by a sugar panel led by C Rangarajan, chief economic advisor, Prime Minister’s Economic Advisory Council. The cement and fertiliser sectors were exempted from the mandatory use of jute bags in 1998 and 2001 respectively.

The union textiles ministry and the Jute Commissioner’s office had been exempted from the investigation as they do not fix the prices of A twill bags that are sold in the open market for purchase by the sugar industry.

The director general, CCI has found prima facie evidence on the allegations and undertook investigation against IJMA and GTA under Section 26 (1) of the CCI Act of 2002.

According to the investigation report, IJMA had connived in every step with the GTA to arbitrarily fix the prices of A twill bags, indulging in unfair practices to rule the market. Almost 30 of the 34 members of the GTA were found to be IJMA members, directly influencing GTA prices. The Commission had also received documents to prove that GTA had been allegedly influenced by IJMA members.

According to the report, prices were planned between GTA and IJMA to set the benchmark prices for trading of jute bags.

A leading jute mill owner said that they will challenge the arguments contained in the report as it is based on pre-conceived notions. The report does not provide any proof of their direct involvement.