The Hindu Business Line : Draft jute policy moots restructuring of JCI

JUTE Corporation of India (JCI) may witness drastic changes in its functional operations and management restructuring if the suggestions made in the draft Jute Comprehensive Policy are implemented.

The draft has criticised the present operations of JCI, which is the nodal agency for procurement of raw jute from farmers at MSP (minimum support price) for following a "faulty" mechanism for claiming compensation, which is not based on "sound financial management principles".

JCI, which was established in 1971, employs a large number of people and maintains a huge infrastructure spread over eight jute-growing States. The policy has suggested that MSP operations can be conducted through contractual staff and from rented premises, which would help JCI to reduce its expenses.

The Union Government provides JCI, which since its inception has been frequently registering losses , a bank guarantee of Rs 33 crore against which the corporation can get bank credit of Rs 100 crore.

In the existing accounting methodology, JCI sees every expense it incurs as a cost of its MSP operations.

Its income includes total sales, value of closing stock, claims received, stock transfer and other income. The amount of net profit in trade is deducted from total income.

"The difference between the total expenditure and income is considered a net loss to the corporation in MSP operation. However, interest in Government loan net of subsidy paid to the corporation is added to this loss to arrive at total loss/profit of JCI in MSP operations," the draft reported.

The report felt that the method of calculation of loss on MSP operations by JCI was not based on sound financial management practices because it loaded the entire establishment expense on MSP operations. Indeed, the system has been followed even in years when JCI has not conducted MSP operations.

"There should be some norm or benchmarking for fixing a certain percentage of turnover for administrative and establishment purposes," the report added.

Time and again JCI has argued in favour of maintaining a sizable manpower and infrastructure. The report stated the stand was not defensible as the JCI could "contract out such operations" to state agencies and hire manpower and godown for a limited season.

The draft policy further recommended that JCI should work out a time frame to adopt modern finance management practices and prepare accounts pertaining to MSP and non-MSP operations.

Since 1970-71 to 2002-03, JCI had submitted claims of Rs 570.67 crore against which Rs 252.40 crore has been paid as reimbursement by the Union Government. This leaves a balance of Rs 318.27 crore.

"Therefore, there is a need for squaring off the accounts of JCI vis-à-vis the receivables from the Government of India and framing a policy for giving consistent compensation to offset the losses of JCI in MSP operations," the report stated.