Though India continues to be the largest producer and processor of natural jute in the world, very little seems to have changed for the industry participants over the last many decades. Manish Kajaria, Chairman, Jute Product Development and Export Promotion Council (JPDEPC), talks about the many challenges that the jute industry faces in the current times and what needs to be done to overcome them.

Interview by Anishaa Kumar |July 2017 Issue |The Dollar Business

TDB: Could you give us an overview of the jute industry in India?

Manish Kajaria (MK): Jute industry, despite being an age-old industry, has not changed much over the last few centuries. About 80% of the production, which we call the conventional product, is still mostly used for packaging of grains and such other items. However, the remaining 20% has gone through a series of changes in the last 20 years and it accounts for those used in the construction industry, lifestyle products, etc. One of the biggest challenges for the industry is the continuous increase in price of raw materials –  but this is expected as it’s a natural product. Also, man-made products, which China produces in large quantities, are another threat to the industry as they are cheaper than the natural products.

TDB: There seems to be a big gap between exports of raw jute and that of jute products. What is the reason?

MK: Yes, the gap is huge. Like I said, this is mainly because of the 80/20 division between traditional products and innovative products. Diversification for export is not an option in the conventional sector as production can hardly meet the demands of the domestic market. Also, the type of jute grown in India does not allow us to innovate. Well, some parts of Assam grow the finer jute, but we have to import the rest from Bangladesh.

That said, there is huge scope, provided the government lends proper support to the sector. We can grow this sector by four-fold in the next five years. But, what we desperately need is awareness campaigns and marketing across the globe. But, the National Jute Board, which is responsible for such activities, is not functioning as per the requirements of modern trade. We are now trying to work with the Ministry of Textiles, by informing them about the sector’s potential.

TDB: Jute processing takes place in only certain parts of the country. Do you think an increase in production can give a fillip to the sector?

MK: Frankly speaking, increase in the conventional jute products will take us nowhere as the government itself is the largest consumer, and pays at least 2.5-3 times more for gunny bags than the market price. Portfolio diversification needs to be given an impetus.  Also, if the government can promote and support in marketing non-conventional products, millers will come up with ways to improve the quality and not just keep producing conventional goods which they sell to the government.

TDB: Other than the lack of a diverse portfolio, what are the challenges the Indian jute industry currently faces?

MK: One of the main challenges the industry faces is the price competition from Bangladesh. The Bangladesh government offers roughly 16% in subsidies to the jute industry that gives their products a competitive edge in international markets. In addition to this, China’s man-made products, which are substitutes for our natural products, is hurting our business. And it’s because China has better infrastructure.

Further, if you look at Kolkata – the jute hub of India – the city has two ports, Haldia and Kolkata ports. But since both have draft issues, only small vessels can be accommodated. And the less we speak about the heavy congestion and the shortage of vessels at ports, the better. At times, the cargo is delayed by 10-15 days, waiting for vessels. In addition, the transit time to Europe is about 40 days and to US about 50 days – which is because of the transshipment in between at larger ports. Because of all these factors, buyers sometimes have to wait for 160 days before they receive the goods. Whereas, the turnaround time for China is around 60 days. And since China produces man-made fibre, an alternative for jute, buyers go to China because they get the goods faster and cheaper.

We try to tackle the situation by routing it through Mumbai, using the roadways, but it comes at an extra cost. Land freight is so expensive that at times transporting one container to Mumbai cost us about $800, which is almost equal to the freight from Kolkata Port to Europe. So, I think, the government must consider providing us with better infrastructure to compete with other countries.

TDB: A few months ago the government imposed an anti-dumping duty (ADD) on imports of jute from the neighbouring countries. How has this impacted the industry?

MK: The number of jute mills is low, perhaps about 30-40. So, by imposing the anti-dumping duty, the government has given the decision-making power to these few millers. The government thought that the duty will protect the domestic industry, but that has not happened. Rather, prices of raw materials have gone up – in January, prices went up by nearly 15%. And because of the price inflation, traders are now suffering.

Going forward, I think, the government must consult all stakeholders involved in the sector. For the record, there are more than a thousand traders in jute industry who do not even get an opportunity to attend the meetings with the government. Before ADD was imposed, imports ensured that millers don’t have complete pricing power and traders have some say. But that is now gone. The anti-dumping duty may be good in the long run – if the demand rises and more land is demarcated to grow raw jute.  

TDB: What assistance does JPDEPC provide to the exporters?

MK: JPDEPC helps both budding and established exporters with their marketing needs by organising trade fairs and international events, etc. For instance, last year, we organised three international trade fairs and made one trip to US. And for the current year, we have two international trade fairs and four big promotional events lined-up. Besides that, we try to be the bridge between the members and the government. But our main task is to promote exports from the industry.

TDB: There are concerns that Goods & Services Tax (GST) will have a negative impact on the sector. Your take?

MK: Well, the concern is about duty drawbacks, which the industry thinks will cease after the rollout of GST. But the duty drawback will continue. The other worry was a higher tax under GST. We have had many meetings with the Ministry and we are happy that jute fibre has been exempted from GST. However, yarn will be taxed at 5%.

"The Industry needs a diverse portfolio to compete with man-made Fibres"

TDB: Do you think some financial aid from the government can boost jute exports from India?

MK: The industry definitely needs financial help, and access to easy finance options will bolster the industry. However, there is a catch! National Jute Board is entrusted with the power to extend such help. But, since the Board is sitting idle, I don’t think it’s the right agency. Jute falls under the Ministry of Textile and they have been active in supporting the sector and can actually do a lot for us.

TDB: What was the impact of demonetisation on the industry?

MK: Well, exports was spared. However, the domestic market was hit because a lot of transactions are done through cash. Jute is a labour-intensive industry, payments are made in cash to the workers and not many of them could open a bank account immediately. While the wave of demonetisation is over, the industry is yet to shift to the electronic mode.