Keeping jute mills operational

The Pubali Jute Mills was set up immediately after liberation to promote industrialisation of the country. The mill was closed last month. About two thousand workers became unemployed. During the last two months, five private sector mills were closed down and about 30,000 workers lost their jobs. During last one and half months 12 jute yarn factories stopped their operation. Yarn producers have reduced production by 50 per cent.

The number of jute and yarn mills, which were closed down in last three years, stands at 40. About 50,000 people used to work in those mills and factories.

The condition of jute traders and farmers is pitiable. Jute prices are going down and its export is declining. Jute traders are due to get Tk 6,000 million from public and private sector mills. Several meetings were held for keeping the losing mills operational but no action was taken. The Bangladesh Jute Mills Corporation (BJMC) and the Bangladesh Jute Mills Association (BJMA), which represents private sector jute mills, are saying that export subsidy of Tk 6,380 million are not being released.

Ten million jute farmers are facing a difficult situation. Jute seed planting has started. Next jute crop will be available in mid-July. Farmers cannot recover their arrears from the mills while jute price is going down. Most of them cannot recover the cost of production. On the top of this, there is unsold jute from last year.

The Awami League in its election manifesto in 2008 promised to reclaim the golden days of jute. Five closed jute mills were reopened after spending a lot of money. But there was no visible progress in the jute sector. All past liabilities were taken over by the government. This sector is now fast approaching extinction. The State Minister of Textile and Jute said that meetings would be held with all concerned so that this sector comes out from the cycle of loss. Jute mills will have to stand on their own feet.

Crisis in international market and lack of progress in increasing the use of jute goods in domestic market are responsible for the current bad situation in the jute sector. The government in 2010 passed a law for compulsory use of jute goods for packaging purposes. But this law has not been implemented. Although polythene bags were banned in 2003, these bags are found in the market in plenty. Even the government departments are not using jute goods. The Centre for Policy Dialogue has said that it is necessary to proceed with a comprehensive policy.

This year jute production target has been fixed at seven million bales. An unsold quantity of two million bales will be added to new production. The huge stock of jute goods will be a big burden on the country's economy.

The BJMA President said that during 2009/2011, there was a turnaround in the jute sector. New entrepreneurs came up. But this sector is now sinking because of crisis in the international market, lack of new markets and absence of compulsory use of jute goods in the domestic market.

There are 130 jute mills in the private sector. These mills export their products to Middle East, India, Thailand and Europe. Because of Middle East crisis and instability in Thailand, jute export to these countries has declined. In view of rise in dollar price in India, they have stopped jute import from Bangladesh. During 2012/2013, export of raw jute and jute goods rose to almost Tk 70 billion. Up to February of the current fiscal year, jute export stood at Tk 32.33 billion. It may at best reach Tk 45 billion by next June.

Price of raw jute is going down continuously. During 2010/11, a farmer could sell one 'maund' of raw jute between Tk 2,000/4,000. At present, the price has come down to Tk1000/2000. Farmers cannot make profit unless the price is Tk 2,000 per maund. Farmers are incurring losses for the last three years.

The lack of domestic market and  shrinking exports have left millions of jute farmers and businessmen in big troubles. Although jute fared fairly well up to 2011, it has gone into steady decline due to multitude of reasons. The government took over the past liabilities of the BJMC. But who will bear the current liability of the BJMC?

The Bangladesh Jute Association (BJA) has urged the government to provide certain facilities to raw jute traders. It demanded availability of bank loans to raw jute exporters at 8.0 per cent interest and a cut in advance income tax deducted on the value of exported raw jute. The BJA justified the demands citing traders' losses due to export slump in the ongoing fiscal year. Exporters bring in Tk 20 billion a year by exporting the surplus raw jute after meeting local demand.

The BJMC is losing money for falling exports. They cannot buy raw jute for want of funds. As a result, the farmers did not get good price for raw jute. Exports have gone down. Jute goods worth Tk 7 billion have piled up in the BJMC mills. They have asked for Tk 2 billion support from the government. Cost of production of BJMC products are high because of old machinery.

One option for solving the problem would be to privatise the jute mills owned by the BJMC so that the private sector may handle their problems in a pragmatic manner. The government may give incentives to them without taking the total liability as in the case of state-owned jute mills. However, the next budget may address the problems of the jute sector and come out with some solution taking into account the report of the Jute Commission.

The writer is an economist                      and columnist. [email protected]