Govt mulls reinstating jute export subsidy plan

A sharp drop in jute exports in value and volume terms is prompting the Central government to bring back the now discontinued export incentive External Market Assistance (EMA) scheme. Discussion on these lines are going on at the highest levels of the textile ministry.

EMA was discontinued from April 1, 2007, on the plea that it was an export subsidy scheme and that the government was gradually planning to do away with all forms of overseas subsidy.

The jute industry discounted the notion pointing out that EMA was an export incentive mechanism and not an export subsidy scheme as claimed by the government.

The government was annually providing an export incentive of Rs 25 crore to all exporting jute firms. Bangladesh, India's only competitor in the international jute market, pays a higher incentive in the region of 7.5 per cent of the total value of jute products. The jute industry has recently pointed out that the discontinuance of the scheme will have an adverse effect on the jute exports, and that it would lose grip on international market.

Industry figures revealed that jute exports came down comprehensively from 2.4 lakh tonnes in 2005-06 to 1.6 lakh tonnes up to January 2007. In value terms, the fall was from Rs 1223.82 crore to Rs 902.82 crore.

An industry representative said, "The fluctuation in the dollar-rupee conversion rate and subsequent appreciation of the rupee during the last 3-4 months have compounded problems for the jute industry, putting the exporters in a bad shape, especially in the absence of EMA."

EMA was launched in 1989 to boost exports of selected Indian jute products as well to compete with Bangladesh in the international markets. It is common knowledge that mills in Bangladesh are heavily subsidised, thereby having an edge over Indian products.

According to the industry, the need for EMA emanates out of the periodic decline in the demand for traditional jute products, especially jute packaging materials. EMA support is also necessary as government increasingly places its thrust on production of diversified jute products.

Diversified items currently comprise 5 per cent of the jute products kitty and the government expects to achieve a comfortable swing of 20 per cent in the future.

At such a juncture, the industry feels the need for restoration of EMA.

As EMA is not being questioned by others, the scheme should be viewed as an effort encouraged to wean away from the dependence of the industry on the Mandatory Packaging Act.