The Hindu Business Line : Row over price ceiling for raw jute — Commodity bourses suspend futures; Consumer Affairs Ministry cries foul

THE Union Ministry of Consumer Affairs, Food and Public Distribution and the Textiles Ministry are engaged in a tussle over the recent announcement of a price ceiling on raw jute.

According to Mr Kailash Gupta, Managing Director of National Multi-Commodity Exchange of India Ltd (NMCE), senior officials of the Ministry of Consumer Affairs are in touch with their counterparts in the Textile Ministry.

On December 14, this year, the Jute Commissioner, who is based in Kolkata, announced that Rs 1,468 a quintal was the ceiling price of raw jute.

Mr Gupta said such an announcement was strictly against the principles of a free market.

NMCE immediately suspended raw jute futures at its exchange.

The other multi-commodity exchanges followed suit.

Raw jute futures is one of the highest volume generators of NMCE.

The Jute Commissioner was forced to make such an announcement because raw jute prices were skyrocketing and it meant that prices of jute bags would also be heading north.

Further, this being the season when several government agencies are busy buying huge quantities of jute bags for storing the rabi crop, the Jute Commissioner's office used its special powers to declare the price ceiling. Raw jute is still treated as an essential commodity.

However, the Union Ministry of Consumer Affairs is not convinced. According to the Ministry, since the powers given to the Jute Commissioner under the essential commodity clause were given by the Consumer Affairs Ministry, it would have been only fair on the part of the Union Textile Ministry and the Jute Commissioner's office to have informed the Union Consumer Affairs Ministry before making such an announcement.

Talking to reporters in the city, Mr Gupta said they were in touch with the Union Ministry of Consumer Affairs and were taking regular updates on the matter. He hoped the matter would be resolved soon.

Mr Gupta's concern on the issue stems from the fact that at NMCE, raw jute is one of the most favoured commodities. Between June 4, 2004 and December 12, 2005, more than 5.83 lakh bales of raw jute were traded on this exchange, marking a total value of Rs 10,954.78 crore.

Our Mumbai Bureau reports: The Forward Markets Commission (FMC) has decided that in case the maturity date of a running raw jute contract falls during the suspension period of the trade, the contracts should be deemed to be settled at the settlement price on December 15.

An FMC release said the commission has intimated NCDEX and the NMCE in this regard.