What if jute bags fall short?

Owing to the lockdown, the availability of jute for packaging could prove to be a problem, as mills have not been functional.

While the West Bengal government had recently granted permission to re-open all jute mills in the State with 15 per cent of their labour force, none of the mills has actually received permission to reopen yet.

Even with all mills reopening with 15 per cent of workforce, it will not be possible to meet the packaging demand. This delay in reopening would only accentuate the situation.

Raw jute prices, which were ruling firm at around ₹4,900 a quintal before the lockdown was announced, are likely to inch lower once the markets reopen on the back of an anticipation of high carry-over stock and a good production this season (July-June 2020-21).

The average price of TD-5 (ex-West Bengal) was ruling at around ₹4,975 a quintal as on March 19, 2020, almost ₹700 a quintal higher than the average price of ₹4,200 a quintal registered in March 2019.

According to Raghav Gupta, Chairman, IJMA, there is likely to be a surplus of over 20 lakh bales (1 bale=180 kg) of carryover stock in the jute season 2020-21. This is primarily because mills have been shut for over one month on account of the lockdown, leading to the demand (for packaging) to be diverted to plastic industry.

“Production of raw jute up to the period of lockdown was estimated to be slightly higher on a year-on-year basis compared to last year. But with this lockdown, and how long it continues, we cannot say what will be the impact on the crop,” Gupta told BusinessLine .

The country produced around 79 lakh bales of raw jute in 2019-20, as against 72 lakh bales in 2018-19. A good production of the crop this year, coupled with high carry-over stock, may bring down raw jute prices further.

However, with all the 60 mills in Bengal shutting operations on account of the lockdown announced during the crucial procurement season (Rabi Marketing Season 2020-21), close to 6.5 lakh bales of demand has already been diverted to plastic.

“All the mills have made online application but we are yet to receive any permission from the State government,” Gupta said.

A majority of the jute mills in Bengal are located in Howrah, Kolkata and North 24-Parganas districts, which have been identified as “hotspots” for Covid-19 outbreak. This could be a reason why these mills have not been allowed to reopen yet, said an industry insider.

“Apart from this diversion of 6.5 lakh bales, the government has also given blanket permission to use plastics or second-hand jute bags for packaging wherever need arises,” said Sanjay Kajaria, ex-Chairman and a committee member of IJMA.

Further diversion would only lead to higher carry-over stock. While IJMA is estimating a surplus of 20 lakh bales, industry estimates suggest that it could be close to 27-30 lakh bales of carry-over stock.

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