Consumer affairs to take up jute pricing issue

The Department of Consumer Affairs (DoCA) plans to pursue the Jute Commissioner's order disallowing trade of commodity at price higher than minimum support price, with the Union Ministry of Textiles, said L. Mansingh, secretary with DoCA.

"The textile ministry and jute commissioner are regulating the sector (jute) from all sides, directly as well as indirectly. We need to help them understand that markets must be allowed to be functional in their own course. And if they do not understand this, we will have to take up the matter with higher ups," said Mansingh, on the sidelines of a seminar on National Consumer Day, which is celebrated on December 24 every year.

The Jute Commissioner had recently ordered to fix prices for various grades of raw jute, under the Jute Textiles Control Order 2000, in line with the industry's long-term demand. As per the notification, no dealer or trader would sell or purchase raw jute at a price exceeding the prices announced.

Following this, no futures trading could be permitted in jute as this would naturally include price fluctuations.

Thus, the commodities market regulator Forward Markets Commission (FMC) advised the exchanges - the Mumbai-based National Commodity and Derivatives Exchange and the Ahmedabad-based National Multi-Commodity Exchange of India - to suspend their respective (jute) contracts on December 15. The exchanges too had approached DoCA and FMC to take up the matter with the textile ministry.

At present, the fixed prices, like that of raw jute at Rs 1,470per 100 kg for the south Bengal (ex-Kolkata) variety, are lower than those reigning on the futures market, about Rs 1,530-60.

"We are of a strong view that the market will not be destroyed and futures contracts are between two parties and sacrosanct. We cannot go by the notion that as long as we profit, the contract remains valid and if we make a loss, we can suspend the contract," said Mansingh.

Jute is one of the most regulated commodity, "at every stage and gets huge amounts of subsidy, directly and indirectly. The order by jute commission has come when market prices are higher than the MSP. However, they fail to understand that farmer will be getting better returns now", he said.

Futures market supporters feel that putting a price cap on a commodity will hurt price discovery process.

Jute industry feels that while prices of jute products, at large, are seen at an all-time high, those of jute remain low and this is hurting the sector's growth.

The reason behind this was hoarding of crop by a group of stockists and traders, looking for benefits on the futures by creating an artificial demand-supply mismatch.