Financial assistance for public sector jute mills
Tuesday, 29 June 2010
Syed Jamaluddin
Jute Commission report has been delayed. It is not known when the report would be submitted. It is reported that the Commission could not start functioning for want of funding in time. Finance Division has finally sanctioned Taka 1.0 million (Taka ten lakh) instead of the demanded Taka 2.1million (Taka 21 lakh). The eight committees set up under the Commission have not yet submitted their report to the Commission. The Commission was established last November. Experts feel that the demand for jute created in the international market should be utilised. The government is, however, pumping money into the jute sector even in the absence of a guideline.
Bangladesh Bank has created a refinancing scheme of Tk 5.0 billion (Taka 500 crore) to meet the financial crisis of the jute industry in the public sector. The government will provide guarantee for the fund. The jute mills under the Bangladesh Jute Mills Corporation (BJMC) will receive funding through the nationalised commercial banks. This is because the jute mills are not in a position to buy raw jute for lack of funding. For this reason the mills cannot operate fully and have to incur losses. The jute mills do not have adequate resources to buy raw jute, pay salaries of the staff, gas and electric bills as well as transportation and maintenance cost.
At the moment, there are 24 jute mills under the BJMC out of which only 16 are operational. Four mills are leased out and four are closed. During the current year, a target for the purchase of 1.98 million (19,82,000) quintals of raw jute was fixed. The cost of this procurement was estimated at Taka 494 crores. Initially an amount of Taka 200 crores was allocated. The mills have purchased 14,58,000 quintals up to 15th March which is 72% of the target. The mills have a current stock of 3,58,000 quintals which covered up to 15th of May, 2010. If the balance amount of jute (5,45,000 quintals) is not purchased, the mills will have to be closed. The mills would require about Taka 3. 65 billion (Taka 365 crore to purchase the balance amount of jute. The mills do not have this much money.
The BJMC has set a target of purchasing 2.12 million (21,20,000) quintals of raw jute which will require Taka 14.2 billion (Taka 1420 crore) and 4.0 million (40 lakh) at the current market price. Moreover, the mills require another Taka 10 billion (Taka 10 crore) for maintenance and overhauling. In this context, the BJMC has requested for an allocation of Taka 10 billion (Taka 1000 crore) for the current and the next year. With this level of funding and purchase of raw jute at competitive prices, it may be possible to make the jute mills profitable.
A large number of marginal farmers, businessmen and labour (about 30 million) are concerned with earning their bread from jute sector. This industry is eco-friendly and based on local raw materials. It provides employment and earns foreign exchange. There is enough justification for assisting the jute sector but the question is whether the sector is viable. It is not known whether the government has made any calculation about viability.
In an attempt to revive the jute sector, the jute mills under the BJMC have been financed with an allocation of Taka 10.9 billion (Taka 1092 crore) from the public exchequer in the form of cash and bank guarantees in the current financial year. Besides, 10 per cent cash incentive has been given to support export of jute goods. The government is taking all steps to restore the lost pride of this sector. This is mentioned in the budget speech. But it is not understood on what basis Taka 10.9 billion (Taka 1092 crore) have been given to the jute mills. Will the jute mills require further assistance in the next financial yea? The government has not given any financial support to the private sector jute mills. The government must explain the rationale of making huge allocation to this ailing public sector.
The discovery of the genome sequence of jute is a glimmer of new hope. But before that hope can take a concrete shape more research, more innovation and institutional replication are needed. It may now be possible to develop new kinds of jute that can grow in extreme conditions or that it will not need the help of pesticides to fight pest. It may also be possible to grow a variety of jute that has better fibre quality, strength, durabillity and so on. It is hoped that the new knowledge about jute will be put to practical use in the field. It is hoped that the fruits of the discovery could be brought to the reach of the farmers within five years.
The five closed jute mills are being reopened. Taka 350 million (Taka 35 crore) will be given for this purpose. This will create jobs for 12,000 workers. The government is doing this by ignoring the views of World Bank. Taka 1.76 billion (Taka crore) will be needed for these mills out of which Taka 350 million (Taka 35 crore) in the month of July to buy raw jute for the mills. The BJMC's outstanding loan is Taka 24.66 billion (Taka 2466 crore). Classified loan is Taka 6.8 billion (Taka 688crore). If money is not available from the finance ministry, loan may be obtained from the nationalised commercial banks. The decision has been taken to open the mills in the public interest. The production in jute mills is going down because of shortage of power.
It is said that a large number of jute products developed by the local scientists have not made it to the market despite their huge commercial potential. Most of the jute products developed by BJRI are not being commercially manufactured. Entrepreneurs have not shown much interest in those products. But unless the products have markets and can make reasonable profit, businessmen may not come forward. The government cannot take the responsibility of commercialising their new products.
The government's jute policy has to be made clear to the people, specially the basis of infusing cash into this sector. There cannot be an open-ended flow of funds from the public exchequer. A coherent policy is called for.
..................................................
The writer is an economist and columnist. syedjamaluddin22@yahoo.com
Jute Commission report has been delayed. It is not known when the report would be submitted. It is reported that the Commission could not start functioning for want of funding in time. Finance Division has finally sanctioned Taka 1.0 million (Taka ten lakh) instead of the demanded Taka 2.1million (Taka 21 lakh). The eight committees set up under the Commission have not yet submitted their report to the Commission. The Commission was established last November. Experts feel that the demand for jute created in the international market should be utilised. The government is, however, pumping money into the jute sector even in the absence of a guideline.
Bangladesh Bank has created a refinancing scheme of Tk 5.0 billion (Taka 500 crore) to meet the financial crisis of the jute industry in the public sector. The government will provide guarantee for the fund. The jute mills under the Bangladesh Jute Mills Corporation (BJMC) will receive funding through the nationalised commercial banks. This is because the jute mills are not in a position to buy raw jute for lack of funding. For this reason the mills cannot operate fully and have to incur losses. The jute mills do not have adequate resources to buy raw jute, pay salaries of the staff, gas and electric bills as well as transportation and maintenance cost.
At the moment, there are 24 jute mills under the BJMC out of which only 16 are operational. Four mills are leased out and four are closed. During the current year, a target for the purchase of 1.98 million (19,82,000) quintals of raw jute was fixed. The cost of this procurement was estimated at Taka 494 crores. Initially an amount of Taka 200 crores was allocated. The mills have purchased 14,58,000 quintals up to 15th March which is 72% of the target. The mills have a current stock of 3,58,000 quintals which covered up to 15th of May, 2010. If the balance amount of jute (5,45,000 quintals) is not purchased, the mills will have to be closed. The mills would require about Taka 3. 65 billion (Taka 365 crore to purchase the balance amount of jute. The mills do not have this much money.
The BJMC has set a target of purchasing 2.12 million (21,20,000) quintals of raw jute which will require Taka 14.2 billion (Taka 1420 crore) and 4.0 million (40 lakh) at the current market price. Moreover, the mills require another Taka 10 billion (Taka 10 crore) for maintenance and overhauling. In this context, the BJMC has requested for an allocation of Taka 10 billion (Taka 1000 crore) for the current and the next year. With this level of funding and purchase of raw jute at competitive prices, it may be possible to make the jute mills profitable.
A large number of marginal farmers, businessmen and labour (about 30 million) are concerned with earning their bread from jute sector. This industry is eco-friendly and based on local raw materials. It provides employment and earns foreign exchange. There is enough justification for assisting the jute sector but the question is whether the sector is viable. It is not known whether the government has made any calculation about viability.
In an attempt to revive the jute sector, the jute mills under the BJMC have been financed with an allocation of Taka 10.9 billion (Taka 1092 crore) from the public exchequer in the form of cash and bank guarantees in the current financial year. Besides, 10 per cent cash incentive has been given to support export of jute goods. The government is taking all steps to restore the lost pride of this sector. This is mentioned in the budget speech. But it is not understood on what basis Taka 10.9 billion (Taka 1092 crore) have been given to the jute mills. Will the jute mills require further assistance in the next financial yea? The government has not given any financial support to the private sector jute mills. The government must explain the rationale of making huge allocation to this ailing public sector.
The discovery of the genome sequence of jute is a glimmer of new hope. But before that hope can take a concrete shape more research, more innovation and institutional replication are needed. It may now be possible to develop new kinds of jute that can grow in extreme conditions or that it will not need the help of pesticides to fight pest. It may also be possible to grow a variety of jute that has better fibre quality, strength, durabillity and so on. It is hoped that the new knowledge about jute will be put to practical use in the field. It is hoped that the fruits of the discovery could be brought to the reach of the farmers within five years.
The five closed jute mills are being reopened. Taka 350 million (Taka 35 crore) will be given for this purpose. This will create jobs for 12,000 workers. The government is doing this by ignoring the views of World Bank. Taka 1.76 billion (Taka crore) will be needed for these mills out of which Taka 350 million (Taka 35 crore) in the month of July to buy raw jute for the mills. The BJMC's outstanding loan is Taka 24.66 billion (Taka 2466 crore). Classified loan is Taka 6.8 billion (Taka 688crore). If money is not available from the finance ministry, loan may be obtained from the nationalised commercial banks. The decision has been taken to open the mills in the public interest. The production in jute mills is going down because of shortage of power.
It is said that a large number of jute products developed by the local scientists have not made it to the market despite their huge commercial potential. Most of the jute products developed by BJRI are not being commercially manufactured. Entrepreneurs have not shown much interest in those products. But unless the products have markets and can make reasonable profit, businessmen may not come forward. The government cannot take the responsibility of commercialising their new products.
The government's jute policy has to be made clear to the people, specially the basis of infusing cash into this sector. There cannot be an open-ended flow of funds from the public exchequer. A coherent policy is called for.
..................................................
The writer is an economist and columnist. syedjamaluddin22@yahoo.com