Prices of raw jute are going downhill with the Union textiles ministry's plan to go for dilution of the mandatory jute packaging order and dwindling crop supplies triggered by the demonetization drive. Raw jute prices have tanked to Rs 36,650 per tonne and are likely to plunge further. The price fall is from the level of Rs 56,520 per tonne in July 2016. In 2015-16, there was an unabated rise in prices of raw jute. The downtrend in raw jute prices may dissuade farmers from growing more in the 2017-18 season, feels a leading jute mill owner. "The combined effect of demonetisation and the government opting for plastic bags to meet the foodgrain requirement for the rabi marketing season has come as a double blow to the industry. The impact is already showing in softening raw jute prices," he said. Raghavendra Gupta, chairman of Indian Jute Mills' Association (IJMA) could not be reached for comments. Amid a projected shortfall of more than 0.17 million bales (one bale is 180 kg) of B-Twill jute bags during the rabi marketing season (RMS) for 2016-17, the Union Textiles Ministry has allowed a dilution of 10 per cent in the mandatory jute packaging order for food grains. The Jute Packaging Materials Act, 1987 mandates 100 per cent use of jute bags for packaging of food grains meant for government procurement. The estimated shortfall in B Twill sacking bags will be offset by the use of high-density polyethylene (HDPE) and polypropylene (PP) bags. Later, the ministry gave further permission for use of 0.32 million bales of plastic bags to cater to packaging requirement of the RMS. Raw jute crop size during 2016-17 is estimated at 9.5 million bales (one bale is 180 kg). However, only 65 per cent of the production has arrived so far in the market. Public sector firm Jute Corporation of India (JCI) has so far produced 0.22 million bales JCI is continuing its purchase since lower grade jute(TD-6 and below) raised in Nadia and Murshidabad regions in West Bengal and parts of Bihar are available at MSP (Minimum Support Price) rates. Further, MSP grade differences are comparatively lower to ruling market prices. This may enable JCI to achieve its initial procurement target of 0.45 million bales during this fiscal. Though JCI's procurement operations is expected to stabilize the prices and arrest falling tendencies, majority quantity of purchase will be of TD-6 and lower grades which have least scope of being used in the laid down batch mix of finished goods. This apart, the low grade varieties of raw jute have least avenue for use in manufacturing diversified jute products for which there is mounting pressure from the government.
Source: Business Standard