Jute growers are not finding buyers to sell their produce at this peak season. The Bangladesh Jute Mills Corporation (BJMC) is not buying raw jute at this time due to fund constraint. It has opened over 140 jute purchase centres across the country but it could hardly buy any jute for want of money.
The middlemen, who are stockpiling raw jute, would be the ultimate beneficiaries as they would be getting premium prices at the fag end of the season when the BJMC would eventually be able to manage funds. The Corporation operates 24 jute mills and buys nearly 1.5 million bales of raw jute annually
The BJMC has requested the government to release Tk 5.0 billion for timely purchase of jute and providing the farmers with price support. The Finance Ministry has released only Tk 1.0 billion. The Corporation has outstanding dues of Tk 2.13 billion. A sluggish market is dictating prices which would be a disincentive for the growers.
The jute industry, which involves about four million farmers and 1,50,000 workers, has been on an acute downturn in export earnings due to the Middle East crisis and a slump in demand from Africa, Thailand and India. Last year, raw jute exports slumped more than 100 per cent from a year ago. About jute goods, only yarn export rose but shipment of sacks/bags went down. Exports fell by 20 per cent in 2013-14 fiscal year, according to the Export Promotion Bureau.
Stockpile of jute goods is at a record high. Jute mills have begun the current fiscal year with the stock which is 62 per cent higher than that of last year. Exports are likely to fall in both value and volume. There is no hope of recovery unless the domestic demand picks up.
The present stock of jute goods will add to the fresh produce in the mills in the current year. The only way to control the current turmoil is to slash production. Failing to face the depressed international and domestic demands, nearly 20 mills have been shut over the past one year. The public and private mills that are still in operation have cut production to overcome the situation. As a result, many workers have become jobless.
The BJMC, which operates 24 state-run mills, has cut production to 400 tons a day from 700 tons earlier for weak demand for jute goods, mainly sacks. To attract foreign buyers, the Corporation has also cut prices but the response is poor. Currently, 90 per cent of the mills are operating in losses.
Prices of fresh harvest of raw jute have started falling as public and private mills are not purchasing jute. The BJMC has purchased only 3.0 per cent of its target of 2.6 million quintals in the current fiscal year due to fund crisis. Private millers are offering low prices on the ground of sluggish export demand. It appears that farmers will incur losses this year for low prices. It is said that implementation of the compulsory jute packaging law can raise the domestic demand for jute bags and sacks.
The law was passed four years ago but it still remains largely unimplemented mainly by private sector traders and millers. They are unwilling to use jute bags for packaging food grains citing higher prices than plastic bags. Plastic bags are available at Tk15/20 per unit as against Tk42/50 per jute bag but jute bags may be used several times and plastic bags are used only once.
The government has initiated a move to overhaul the state-owned jute mills by replacing century-old machinery with modern equipment aiming to make the units operationally vibrant and commercially viable. To push the move forward, the BJMC has signed three memoranda of understanding (MoU) with the Chinese companies for balancing, modernisation, rehabilitation and expansion of the 26 state- run jute mills.
As per MoU, the Chinese government will send a high-powered delegation to Bangladesh to conduct a survey for assessing the financial requirement for implementing the project. China will provide soft loan for the project. After its completion, the jute mills will produce high-value jute textiles that will have a wide range of demand in local and international market. Observers feel that before taking up all the mills at a time, it may be wise to have a pilot project to test the viability.
The Bangladesh Bank has signed participatory agreements with 16 commercial banks to disburse Tk 2 billion refinance fund among jute millers and traders with a view to helping them in purchasing raw jute during the current season. The central bank set up the fund to help salvage the ailing jute industry. The traders will be able to buy raw jute at the level of growers and thereby farmers will derive benefit.
The commercial banks would get the loans at the rate of 5.0 per cent. But they will disburse the loans at the rate of 9.0 per cent. The repayment has to be made within a year. The board of directors of the central bank has approved the refinance scheme to boost the ailing jute industry. The jute mills have been incurring heavy losses and going through crucial time due to acute shortage of fund.
Presently, there are 238 jute manufacturing units in the country. Of these, 90 private spinning mills produce jute yarn while 18 state-owned mills and 130 private jute mills manufacture hessian, sacks and bags.
Because of heavy debt burden, majority of the mills are in a financially weak position. The central bank refinance scheme is a stop-gap arrangement and does not address the real problems of jute sector. The government has spent huge sums of money over the years for making the jute sector viable but it did not work. The report of the Jute Commission did not make any impact.
The writer is an economist                       and columnist. jamaluddinsyed23@yahoo.com.au
Stockpile of jute goods at a record high
Syed Jamaluddin | Published: August 28, 2014 00:00:00 | Updated: November 30, 2024 06:01:00
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