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Golden fibre to long noose

January 13, 2001: Two managers of Baranagar Jute Mills were burnt to death after a worker was shot dead allegedly by one of the managers.

May 15, 2008: Titagarh Jute Mills personnel manager was battered to death by suspected members of a union.

June 15, 2014: The chief of operations of Northbrook Jute was battered to death.

Once known as the golden fibre of Bengal, jute now hits the headlines mostly when it becomes a noose or when the government once in a while tugs at the long rope it has gifted the industry.

The jute industry’s mainstay is the order placed by the central government for bags to pack grain and sugar. Known as the procurement order, it was initially a crutch for the industry and gradually became a life-support system without which the sector cannot breathe on its own. The government used to pay for jute bags almost twice the price of plastic bags — citing the ecological benefits of the fibre.

If the central government procured 27 lakh bales of jute bags in 2012-13, the quantity dipped to 23.5 lakh bales in 2013-14. Such a fall would have told on the overflowing godowns of jute factories, prompting companies to scale back production — a threat seen as the immediate trigger for today’s murder in Hooghly.

When a combination of factors — ranging from cuts in the procurement order, the play of food grain market forces, the rising prices of raw jute and labour cost — began piling pressure, the industry found that it could not reinvent itself and wean itself off the government’s oxygen supply.

The prospects for the industry were looking a bit better in the past decade because of the procurement order and flat prices of raw jute.

But in 2012-13, the cabinet committee on economic affairs diluted the procurement order to say that 90 per cent — not 100 per cent — of food grain needs to be compulsorily packed in jute bags. For sugar, the mandatory quantity was halved to 20 per cent from 40 per cent.

A 10 per cent cut in one segment would not have made a huge difference to other industries but it did for jute because of the overdependence on government procurement.

Besides, food procurement itself appears to have hit a logjam, though a Food Corporation of India official said the process was proceeding fast.

The central buffer must have 212 lakh tonnes of grain (rice and wheat) as on April 1 and 319 lakh tonnes by July 1. But the central pool, created through procurement programmes conducted by the FCI and the state agencies, currently holds 622.31 lakh tonnes of grain — almost twice the required level as on July 1.

The buffer stocks in the country are overflowing and both the FCI and the state agencies appear to have severely curtailed their procurement programmes.

A central government official said it was a folly to blindly bank on government procurements. “Procurement depends on a statistical projection based on food grain production as well as market price. No one knows how the production will be. And if the price of food grain is higher in the open market than the government’s price, farmers will not sell to the government,” he said, explaining the fluctuations in government orders for jute bags.

Industry sources said today’s lynching portended troubled times for the industry, which has failed to reinvent itself despite jute being an environment-friendly product and environment having become a modern-day concern.

Over 2 lakh workers are engaged in the jute segment in Bengal — a pointer to the state’s inability to diversify into other industries.

“The industry is passing through troubled times. There is a paucity in procurement of jute bags and many mills in Bengal are not operating at full capacity,” said Sanjay Kajaria, a former chairman of the Indian Jute Mills Association (IJMA).

The industry is also facing an impending wage revision, which will push up the cost of production further. The wages and dearness allowance are based on the consumer price index and are revised periodically.

“Jute is a labour-intensive industry. Wages make up a large chunk of the production cost. Big mill owners at times pay up to Rs 450-500 a day to workers, compared with the minimum wage of around Rs 350 a day,” said Ghanashyam Sarda, owner of several jute mills in Bengal, Bihar and Andhra Pradesh.

The murder of the two managers in 2001 had taken place in Sarda’s Baranagar jute mill on the northern fringes of Calcutta.

Kajaria felt that the jute cultivators in Bengal would also be severely affected if the mills were forced to scale back production.

“The worst affected would be the 40 million farmers in Bengal. In the past few years, jute cultivation had already come down from 9 lakh hectares to around 7.7 lakh hectares,” Kajaria said.

One fallout of the fall in cultivation has been a rise in the prices of the raw material. Raw jute prices have soared to Rs 3,000 per quintal now, compared with Rs 1,800 per quintal four years ago, said an industry analyst.

The industry is again pinning hopes on the government. “The situation in the jute industry has been tense over the last six months. The state as well as the central government need to address the issues of the industry on a war footing to avoid further crisis. Mill owners, the government and the unions should not treat this incident in isolation and should take necessary steps to avoid similar incidents in other mills,” said Sarda.

The IJMA has already written to the central government seeking an appointment to discuss the issues facing the industry. “The central government and the state government need to set their differences aside and discuss ways to find a solution,” Kajaria said.

His comments came on a day Mamata Banerjee blamed an RSS-backed union, the BMS, for the violence and the union hit back by saying she was trying to malign the BJP.

“The industry has failed to develop a new product line. Jute bags are just not competitive. While high wages are one problem, the rise in raw jute prices has dented competitiveness. The industry must innovate to survive,” an analyst said.