The Competition Commission of India (CCI) will investigate an alleged cartelisation charge on the domestic jute industry. Prima facie, the regulator has found substance in the complaint and last week decided to initiate a probe, said a sugar industry official.
The sugar industry had filed a complaint with CCI through two apex associations claiming that the jute industry had abused its dominant position by charging excessive price in the absence of competition.
It had appealed to the commission to use its advocacy role and advise the textile ministry to suitably relax the mandatory jute packaging requirements for sugar. The textile ministry, the administrative ministry for jute industry, and the two jute industry bodies have been made parties in the case.
The sugar industry consumes around 300,000 tonnes of A Twill jute sacks at Rs 1,650 crore at the Rs 55,000 a tonne. “The Indian Jute Mills Association and Gunny Traders Association have cartelised the market for packaging material for sugar thereby infringing section 3(3) of the CCI Act by jointly deciding sale prices and limiting technical development of the industry,” the Indian Sugar Mills Association and National Federation of Cooperative Sugar Factories have alleged. The All India Flat Tape Manufacturers Association, which produces plastic sacks, has also joined hands since the reservation given to jute industry has restricted their growth.
The Jute Packaging (Mandatory) Act of 1987 had made use of jute bags mandatory for packing sugar, foodgrain, fertiliser and cement. But, the supply of jute bags failed to keep up with the growing output. As a consequence, cement and fertilisers were exempted. An exception is given to sugar mills on sugar meant for export and bags of up to 25kg.
In international trade, the accepted practice is to pack sugar in high-density polyethylene (HDPE) bags. The Centre has the power to decide on the quantum of sugar that should be packed in jute. However, the government has repeatedly overruled the recommendations of the Standing Advisory Committee that sugar factories be allowed to pack 25 per cent of their production in non-jute bags.
The situation, the sugar industry argues “has encouraged the creation of a dominant position of the jute industry, whereby they are misusing the position by taking undue advantage of their monopolistic and dominant position in the absence of any competition from non-jute suppliers”.
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The associations have argued that since grains are procured by the government for PDS, sugar is the only commodity handled by the non-government body that is forced to use jute.
The sugar industry argued that by making jute bags mandatory, the sweetener consumers are penalised in two ways: First, they are made to pay an extra 40 paise for a kg of sugar since cost of jute bag is higher and second, that the sugar is not as clean as it would have been if it had been packed in HDPE bags.