A shimmer of hope for the golden fibre as demand for shopping bags rises

Source: The post is based on an article “A shimmer of hope for the golden fibre as demand for shopping bags rises” published in The Business Standard on 16^th September 2022.

Syllabus: GS 3 – Transport and marketing of agricultural produce and issues

Relevance: issues with the jute industry and measures to improve them

News: The government has recently banned single use plastic bags and this has led to an increase in the demand for jute bags. However, the jute industry faces many challenges and has to stay in line with this demand.

Jute is 100 per cent biodegradable and environment-friendly.

What is the current situation of jute industry in India?

Jute mills mainly focus on exporting jute bags due to the high global demand.

According to data from the Indian Jute Mills Association (IJMA), export of jute handbags was about 47 million in 2015-16 and increased to 104 million in 2021-22.

Shopping bags account for about 50 per cent of the export basket for most mills.

However, there are many problems this industry is facing.

What are the problems with the jute industry in India?

Market diversification: The jute industry in India is small and only few mills have taken the advantage to export.

This sector is highly dependent on government orders and small to medium sized mills are producing almost 100 per cent government orders.

The size of the jute industry is about Rs 10,000 crore out of which the government is procuring around Rs 7,500 crore of jute bags. The rest is exported to various firms.

Only few large companies with modernised facilities are generating 30-40 per cent of their revenue from exports.

Financial Issues: The other problem is the financial condition of the jute industry is challenging.

Regulations: The jute sector is a highly regulated sector. The government determines the minimum support price (MSP) of jute crops for each crop year and jute bag prices are fixed on a price formula of the Tariff Commission.

The Jute Packaging Materials Act (JPMA), 1987 has mandated that 100 per cent of food grain and 20 per cent of sugar production is packed in jute bags.

But the margins on government orders are low. It lies between 5 and 7 per cent for jute bags other than shopping bags which has over 10 percent margin.

What are the challenges with the low margin in the jute?

The low margin has various challenges.

For example, the jute production was very low in the year 2021 which led to the minimum carryover for FY 2022. This caused the rise in jute prices upto Rs 7000 – 7200 per quintal.

The government announced maximum procurement price of raw jute in September 2021 which was around Rs 6,800 while the MSP was Rs 4500 per quintal.

In many cases, the government-mandated maximum price of raw jute doesn’t work. However, this price cap didn’t work and jute mills had to buy raw jute at higher prices. This led to the closure of operations in about 15 jute mills.

What can be further course of action?

First, the jute industry’s dependence on the mandatory sector is another challenge. There is a need to develop new markets for jute products in order to make this industry survive. The other probable markets may be soil savers and jute geotextiles. But we need research and development to figure out where jute fiber is required.

Second, there is currently demand for shopping bags only in export markets. However, with the ban on single-use plastic items, it is expected there will be a rise in the demand in the domestic markets as well.

Third, Bring Your Own Bag campaign (BYOB) campaign has been represented before the Ministry of Textiles. This campaign focuses on using reusable bags.

However, in India, campaigns can lift the demand but industries also need to push towards modernization to grab the market and bring back the lost shine in the jute (golden fiber).