Jute industry opposes move to auction bags on Govt e-Market Place portal

The jute industry has launched a murmur of protest against the Textiles ministry’s proposal to initiate procurement of jute bags through competitive bids on the Government e-Market Place (GeM) portal.

The textiles ministry has been toying with the idea after a recent meeting of stakeholders where the possibility to source jute bags through auctions was discussed. The idea was initially floated by the Union commerce ministry.

Though the plan to put jute bags to auctions is still at an incipient stage, the industry is sulking. Voicing its reservations, the jute industry said procurement of jute bags through competitive auctions is fraught with uncertainties which would work to the detriment of the industry.

Previous attempts to start a rate contract system for jute bags have failed thrice as the jute industry stoutly opposed the plan. Back in 2013, the Union commerce ministry had labelled jute as a sensitive item. Jute bags used for packaging of food grains and sugar, enjoy protection under the Jute Packaging Materials Act (JPMA). As per the prevailing system of procurement, the Office of the Jute Commissioner issues production control and supply orders based on projections by the jute mill owners. Jute bags are procured by the Food Corporation of India  (FCI) and other state run agencies.

However, if competitive auction supplants the existing mode of procurement, the industry fears that price of the Jute Commissioner would cease to be effective.

“Under the competitive bidding scenario, there will be no ceiling on the lower price. The industry stands to lose by such an arrangement. This would serve as a fresh blow to the jute mills who are already buffeted by the pricing methodology and the recently submitted Tariff Commission which is scarcely in the industry’s favour. Competitive bidding through GeM portal would be inimical to the interests of the jute industry and will be non-business like and unfair”, said an industry source.

Each year, the government subsidies the jute industry to the proportion of Rs 35-40 billion- a figure equivalent to the wages of 0.2 million industrial workers. Around four million farmers are engaged in raising jute crop and profit from the mandatory legislation- JPMA.

The plan to bring jute bags under GeM purview was discussed threadbare at the 26th Standing Advisory Committee meeting on jute recently. Officials from the Commerce ministry pointed out that e-procurement option was available for plastic bags. Certain officers of the Union textiles ministry suggested that some percentage of the jute bags procurement could be routed through competitive bidding. A seven-member panel with officials drawn from the ministries of textiles, commerce and food is examining the feasibility of the proposal. There are fears that should the GeM fail to materialise, it could cripple the jute supply chain. Also, the success of GeM model is suspect in an administered price regime.

Aside from pricing issues, the jute industry has flagged logistical bottlenecks for implementing the auction system. Presently, jute goods are moved primarily through Railways and the rest through Container Corporation of India (Concor). Both Railways and Concor have developed logistics arrangements over the years for carrying jute goods. Shifting jute procurement to GeM portal may lead to problems in logistics coordination and hinder individual despatches to distant parts of the country.

The jute industry also apprehends that competitive bidding through GeM portal will dispense with the existing system of allocation of production control cum supply orders (PCSOs). “This will result in uneven distribution to jute mills and the purpose of JPMA will be defeated. As size determines price, bigger mills would be in a position to absorb losses in manufacturing while smaller mills will get wiped out in the system of competitive bidding”, said a mill owner.