Success of private sector jute mills

Demand for traditional as well as diversified jute goods are increasing worldwide, because of the rise in oil prices and the environmental and health hazards posed by synthetics. Small scale private entrepreneurs using workable old looms have set up successful jute businesses. Jute goods exporters claim that there is no reason why this sector should remain sick. Many entrepreneurs who have proved successful in developing viable new products have said that the government is not doing enough for this sector. Import of synthetic floor covering is harmful to the industry and should be stopped forthwith and serious attention should be given to research and development of commercially viable jute-based projects. Public sector jute mills are not in a position to take advantage of the new opportunities. Newly opened jute mills are just running, as government steps are slow in reviving the jute sector. The jute minister is optimistic that public sector jute mills will also be profitable. But nobody knows when this will happen and how. During the current year price of jute goods has increased by 33 per cent. Export of raw jute and jute goods has increased by 54 per cent during the first six months of the current financial year. This success is mainly due to private initiative. A jute commission was set up in the middle of 2009 to produce a comprehensive report on the problems and prospects of the jute sector. Due to decline in the use of synthetics in the international market, the demand for natural fibres like jute has increased. Therefore, jute prices registered an increase of 30 to 40 per cent in a year. The demand and price of jute are expected to rise further. In the last two years, jute exports from the private sector increased on a regular basis. The demand for jute yarn and raw jute increased considerably in the markets of Europe, China and India. Last year, India imposed duty at the rate of 14 per cent on the export of jute from Bangladesh. However, India withdrew the duty in the face of protest from Bangladesh. Price of raw jute has exceeded the Tk 2000 per maund mark in the local market and production of raw jute has increased considerably. The cost of production of one tonne of sackings is Tk 68,000 in the private sector in the current year and the export price is Tk 76,000 per tonne. The cost of production of hessian is Tk 107,005 per tonne and the export price is Tk 119,440 per tonne. This shows that the private sector is making profit in these two items. According to newspaper reports, Bangladesh Jute Mills Corporation (BJMC) earned Tk 3.27 billion in the first six months of the current year, but it has not been said if BJMC has made any profit. It was not possible to obtain any satisfactory report from BJMC about their cost of production. BJMC may publish their cost of production and export price for public information. The Export Promotion Bureau could not also furnish reliable figures when contacted. If public sector jute mills are not in a position to make profit in the present situation, their prospect of becoming viable will be uncertain and the need for privatisation will be stronger. As mentioned earlier, a jute commission was set up in May 2009. A sum of Tk 1.8 million was allocated for the purpose. The commission was supposed to submit its report last October last. The members of the commission visited some jute mills in Chittagong and Khulna. The commission chairman informed that the report would be finalised soon and submitted to the government. The Jute Packaging Act 2010 was notified on September 20 last. Under this Act private and public sector agencies have to use jute bags initially for rice, flour, sugar and fertiliser. But it is yet to be implemented. The Advisory Committee on implementation of the Mandatory Jute Packaging ACT 2010 has decided to recommend bringing private organisations concerned within the purview of the law to ensure a level playing field with state agencies. According to the decision, private organisations that are involved in production, storage and transportation of food grains, sugar and fertiliser etc., will be brought under the Act in phases. The decision of the committee came after its meeting recently. It was mentioned at the meeting that the state-run entities would have to face an uneven competition with the private sector, if the law was made applicable for the government organisations alone. The meeting was also informed that the prices of jute made packing bags are considerably higher than those made of plastic or polythene. On October 3 last, parliament passed the Mandatory Jute Packaging Bill but the necessary rules on the law are yet to be framed. The government formed the Advisory Committee for implementation of the jute packaging law through providing necessary inputs and recommendations until the rules are framed under the law. It was also decided that the Directorate of Food, Bangladesh Agriculture Development Corporation (BADC) and Bangladesh Chemical Industries Corporation (BCIC) would take steps to purchase jute bags from the government and the private suppliers. The meeting also asked the suppliers of jute bags, namely BJMC and Bangladesh Jute Mills Association (BJMA), to take appropriate measures to supply the bags according to the demand of the agencies concerned. It was also observed that apart from higher costs, there were also some technical problems with the use of jute bags for storage of cement, sugar and fertiliser. The government has to consider if jute bags can be made competitive in the packaging market. (The writer is an economist and columnist. He can be reached at e-mail: syedjamaluddin22@yahoo.com)