source Bangladesh has a population of 167m of which 64.7 per cent live in rural areas and 35.3 per cent in urban centres. The median age of the population being 26 years, the challenge for Sheikh Hasina government is to create condition for highly employment intensive industries to grow and prosper. In order to discourage migration of people from villages to cities adding to the already acute urban crisis, Dhaka has to see that people’s engagement in crop growing is rewarding. No other crop other than jute fits the bill of providing income to large masses in villages and factories around cities.
follow link Jute is a major cash crop, meaning a ready market on harvesting, for over 3m small households in Bangladesh. The country’s about 220 jute factories, including spinning units, provide employment to over 175,000 people. Thousands also make living in mill downstream activities such as making of shopping bags and decoratives and trade in jute and jute goods. No wonder then, Dhaka is lending policy support to the jute sector in many ways, including cash incentive of 20 per cent for diversified products.
http://goldenbeeltd.com/index.php?rest_route=/oembed/1.0/embed But India with as much as 70 per cent share of production is the leviathan of the global jute mill industry whose prospects are steadily improving as revulsion to use plastic is universally growing. Though a much smaller manufacturer of jute products than India, Bangladesh continues to have a domineering presence in exports, thanks to the aggression that marks its marketing. The market within the country being limited, Bangladesh continues to do everything possible to ship growing quantities of traditional and new age jute products and also raw jute that remains surplus after taking care of local mill requirements. In more recent times however, Dhaka has given a shot to expand the domestic market for jute goods by giving effect to the mandatory jute packaging Act enacted in 2010. A statute of this kind has provided lifeline to Indian jute factories for a good number of decades.
Bangladesh’s export earnings from the jute sector were up 6.5 per cent to $1.02bn in 2017-18 (July to June season) from $962.42m in the previous year. Incidentally, jute has now joined the country’s the over $1bn export earning garments and leather industries. In contrast, only a few of the 78 Indian working jute factories – 19 are closed – are active exporters with their sights fixed on the big domestic market, specially the government procurement of sacking bags for packing foodgrains. Under the Jute Packaging Materials Act, New Delhi has been on a yearly basis prescribing the percentage of foodgrains and sugar that must compulsorily be packed in jute bags. Presently, jute bags are to be statutorily used for packing 90 per cent of foodgrains and 20 per cent of sugar. Long in the past fertilisers and cement were required to be packed in jute bags. Jute got displaced in fertilisers and cement packaging by its rival synthetics.
What is immensely comforting for mill owners is that government procurement of jute bags is done on a cost plus basis leaving handsome margins for bag suppliers. Scotsmen, particularly from Dundee and also the East India Company set up a large number of jute mills on the two sides of the river Hooghly and they would process raw jute grown mostly in eastern parts of undivided Bengal. Independence and the abolition of Managing Agency System made the transfer of ownership from the British to Indian houses, mostly owned by Marwari families an inevitability. Jute, which created enormous wealth for foreign owners of factories making hessian, sacking and yarn during the two World Wars also rewarded the new Indian owners handsomely between the 1950s and mid 1970s, albeit marked by periodic labour unrest and faltering demand and low prices.
But as trade union movement gained in ferocity in West Bengal leading to frequent mill closures and violence, leading industry houses, including the Birlas, Goenkas and Soorajmull Nagarmull thought it wise to quit the jute industry altogether or substantially reduce their presence. They shifted their focus to building or acquiring industries in other parts of the country. As it would happen, many of the mills have been acquired by people engaged in raw jute and jute goods trade with no experience in running an industry. They are the people virtually frozen in time who are not to invest in new technology and machinery. The survival of mills owned by them is dependent on government orders.
No wonder then of the Indian annual production of jute goods in the range of 1.1m tonnes to 1.27m tonnes, exports have remained a low of around 155,000 tonnes. Domestic consumption determined principally by output of foodgrains and sugar has moved between a high of 1.156m tonnes and a low of 1.075m tonnes. A commerce ministry official laments: “Leave out just about half a dozen factories, the rest of the industry lacks a spirit of competition. If their agenda within the country is to seek government intervention to restrict the use of synthetic bags without making attempts to match the prices or quality of alternative packing material, they remain untiring in explaining away their disappointing export performance on advantages enjoyed by Bangladeshi mills.”
Why should India’s exports of jute sacking bags be 46,600 tonnes (2016-17) when Bangladesh is finding new outlets in many African countries seeing virtues in keeping foodgrains in bags made of hard natural fibre? Leave out the irretrievably sick mills in the government and private sectors, the industry benefiting from large scale government bag procurement is not doing badly. Besides good cash flow, the government has on offer the following incentives for industry modernisation: (i) The amended technology fund scheme (ATUFS) providing 15 per cent capital investment subsidy on “eligible” machines: (ii) National Jute Board incentive scheme for machinery acquisition; and (iii) Incentive at the revised rate of 7 per cent on fob value for export of “specified goods to specified countries.” No matter what incentives are on offer the “a large section of the industry will not change.”
When a factory is making jute diversified products such as furnishing fabrics, shopping bags, floor covering and decorative, it is not tonnage that matters but the very high value that is added to humble jute. Thanks to the work done by forward looking factories in India and Bangladesh backed by technology breakthroughs by jute research organisations in the two countries, the universe of value added products (VAPs) is expanding. There are technical VAPs such as geotextiles whose laying during road building keeps construction materials firmly in place, agro textiles, fire retardant jute fabrics, hydrocarbon free bags and jute leno fabrics. Riding largely on VAPs, Cheviot, which besides the mother factory built an export oriented unit at Falta export processing zone in West Bengal some years ago, the once a US group owned Ludlow now majority owned by RV Kanoria group and Gloster earn a good portion of revenue from exports. With their strong balance sheets, these companies have in a way recreated history with their shares commanding very high premiums in the stock market.
In the current season what is staring in the face of the Indian industry is the projected setback in jute crop at 6.2m bales of 180 kg each from 7.4m bales in 2017-18. Not only this, the quality too has taken a dip. This is particularly worrying since Bangladesh put a ban on export of uncut raw jute in January. The move was supposedly prompted by New Delhi putting antidumping duty on jute goods imports from Bangladesh and on suspicion that some traders were exporting high grades of jute as uncut jute. For some diversified products, India badly needs Bangladeshi origin silky lustre jute. Indian mills will expect New Delhi to use economic diplomacy to persuade Dhaka to withdraw the ban on uncut jute export. The point, however, remains that like India, Bangladesh is also harvesting a small crop this season.