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The jute industry is sore over the decision of the directorate general of supplies & disposal (DGSD) to revise payment terms for the industry.
The DGSD has decided to withhold 10% payment made to jute mills for supplying gunny sacks to Food Corporation of India (FCI).
"The decision is unilateral and against the interest of the jute industry. It will have an implication of Rs 650 crore on the industry”, said an industry source.
FCI annually procures around 12-14 million tonne of jute bags valued at around Rs 6,500 crore. The current price of one tonne of jute bag is around Rs 56,000 or Rs 3,700/100 bags in June.
The jute industry is crying hoarse on DGSD’s decision. According to industry, it is a rate contract system and is not applicable to them. Supply of jute bags are made on orders issued by DGSD and production control orders from the jute commissioner. The prices are fixed by the jute commissioner.
The industry has approached the director general S N Mohanty holding the decision as 'unilateral’. As per the industry, it will foment labour unrest and disrupt production. The industry claims it has limited capital and cannot absorb the shock of extending credit to the government.
As per the Jute Packaging Materials Act (JPMA), in 2012-13, 90% of food grains produced in the country were packed in jute sacks. For 2013-14, the standing advisory committee on jute recently decided to maintain the same level. Originally, they had planned to reduce it to 70%.
Jute bag prices are fixed on a 12-year old formula worked out by the Tariff Commission. During this period, the government disallowed cost escalation on half the items necessary for production of one tonne of jute bag. They include stores, repairs, overhead, other packing, depreciation, interest, return and others.
