West Bengal's lack of industrialisation is working to the advantage of jute mills in the state and elsewhere in the country. Irrespective of the coalition in power in the state, the West Bengal government will make New Delhi agree to continue with the practice of mandatory packaging of sugar in jute bags. Every season the edict is passed, the Cabinet committee on economic affairs will justify the move by citing the miseries that would otherwise befall some four million farmers and also 370,000 workers engaged in over 70 jute mills and a large number of ancillary units.
An argument, however, runs like this that if the Centre was so concerned about the welfare of jute farmers, it would have spared a thought for the Rs 300 a quintal subsidy the West Bengal government wanted it to pay over the minimum support price (MSP) for raw jute to defray 'sharp escalation in jute growing cost.' The state is giving a subsidy of Rs 100 a quintal over MSP. The counter-argument is, New Delhi will fix MSPs for major crops in an attempt to maintain a “remunerative and stable price environment” based on the recommendations of the Commission for Agricultural Costs and Prices, which takes into account all input costs, plus fair margins for growers.
MSP acts as the safety net when crop prices fall under heavy arrivals in a bountiful year, triggering market intervention by procurement agencies. Thanks to the good monsoon which has left enough water in canals and ponds for ideal retting of jute, the country this jute season (July to June) is harvesting a bumper crop of at least 11 million bales of 180 kg each. To add to supply pressure, the season opened with stocks of 2.2 million bales, with likely imports of another 500,000 bales. As total supply of raw jute is to jump from 11.9 million bales in 2010-11 to 13.7 million bales in 2011-12, the mills are keeping fibre inventories low. The result is at many centres in Assam and West Bengal, jute has come close to MSP, leading Jute Corporation of India to start buying fibre. Jute is seeing a price depression after two years.
Farmer welfare can be promoted in many ways without compromising the freedom of choice of a packaging material by a group of consumers, in this case sugar mills. But this is happening with the sugar industry, agro-based, with five million people engaged in growing cane. Sugar factories are denied the freedom to choose the packaging medium. The denial of choice goes beyond the factories to bulk buyers of sugar, like soft drink makers and confectioners, who cannot ask for their sugar to be packed and delivered in non-jute bags. Incidentally, bulk users like these and the pharmaceutical industry account for nearly 70 per cent of the country's sugar consumption.
But why should producers of food items and medicines want substitution of eco-friendly and biodegradable jute packaging material with polypropylene (PP) bags?
They are not contesting the goodness of jute, the ideal packing medium for rice, wheat and pulses. But they are raising objections to sugar being packed in jute bags called A Twills, for these tend to absorb moisture and also allow microbial growth. What further causes annoyance to bulk buyers are the jute fibres invariably found in sugar delivered in A Twill bags.
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Even if the material on delivery goes through a fine-toothed comb, there is no guarantee that all jute fibres will get separated from sugar. Cost is also a major issue with both jute factories and bulk buyers of sugar. PP bags used elsewhere in the world for packing sugar come much cheaper than jute bags.
Packing of the commodity in jute bags, therefore, becomes particularly hurtful for sugar factories when they are contending with steadily falling prices caused by the prospect of a bumper production of 25 million tonnes and an unjustifiably big December release of 1.7 million tonnes. In a falling market, the trade and big users are not to be expected to sit on big sugar inventories.
To add to the discomfort of factories in Uttar Pradesh, the country's largest cane growing state and accounting for about a quarter of the country's sugar production, the Mayawati government has posted a locally advised cane price of Rs 240 a quintal, a premium of Rs 95 a quintal on the centrally-set fair price. There is no economics involved. So, the desperation of UP factories to switch from expensive jute bags to cost-effective PP bags is understandable. In this, they have the support of factories in states where local governments have taken a pragmatic stand on cane prices. Former Indian Sugar Mills Association (Isma) president Om Dhanuka says the issue is one of freedom of choice for consumers.
While there is no evidence that jute mills are working in a cartel to fix bag prices, there are whispers that a growing amount of non-exportable sugar is packed in plastic bags, in contravention of Jute Packaging Material Act. It is for the sugar industry to kill such rumours.