Mills expect new pricing methodology for jute bags to translate into 4-5% higher pricing

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Mills expect the new pricing methodology for jute bags used in packaging of foodgrains, which has been approved by the Central government, would translate into a 4-5 per cent higher pricing for each bag, providing a big boost to the ndustry.

Fulfilling a long-standing demand of the industry players, the Cabinet Committee on Economic Affairs (CCEA) approved the new pricing methodology for B-twill jute bags, used for foodgrains packaging, based on the report of a Tariff Commission on Wednesday.

Government agencies purchase bags from jute mills every year for compulsory packaging of 100 per cent foodgrains and 20 per cent sugar to provide financial benefits to mills which employ about 4 lakh workers. Currently, around 100 jute mills are operating across the country.

According to the Indian Jute Mills Association (IJMA), after nearly 22 years the CCEA has considered the Tariff Commission report and finalised the new methodology for calculating jute bag prices. It will ensure enhanced pricing for jute bags purchased by the government agencies as the new methodology is designed to provide better pricing for jute mills, contributing to the overall growth and sustainability of the industry.

The CCEA approved the new methodology of pricing in its meeting on August 28.

More dynamic

Industry participants said as the new pricing methodology is based on an authentic cost study, it is more transparent, dynamic and responsive to market changes compared to the existing one, which was running on a temporary pricing provision. The existing pricing system led to financial strain on jute mills because it did not keep pace with rising costs.

“We wholeheartedly welcome this decision of the Government as it will go a long way towards helping the industry for modernisation, diversification and growth in the country’s jute industry. While the earlier formula for calculating prices of jute bags was based on estimation, the new methodology will take into consideration every cost parameters for mills — raw material costs, wage cost, electricity cost. So, it is more dynamic and would be more remunerative for the industry. It should translate into close to 4-5 per cent higher pricing for each bag,” Indian Jute Mills Association Chairman Raghavendra Gupta told businessline.

Currently, prices of 580 grams jute bags are around ₹52-53 per bag. And, on average around 72-75 per cent a jute mill’s sales are happening through the Union government. “As the mills were supplying bags at provisional prices, the new pricing methodology will be effective since the provisional formula was invoked in September, 2016. We will be raising supplementary bills for the past dues,” Gupta said, adding the mills would be able to calculate the amount accrued after the government comes up with the revised pricing for the bags.

Pivotal moment

The Government purchases jute sacking bags of around ₹12,000 crore every year for packaging of foodgrains, ensuring guaranteed market for the produce of jute farmers and workers. Average annual production of jute sacking bags is about 30 lakhs bales (9 lakh tonnes) and the government has been procuring sacking production of the jute mills in order to protect the interest of jute farmers, workers and persons engaged in the jute Industry.

“The revision of jute bag prices based on the Tariff Commission’s recommendations marks a pivotal moment for the jute industry. After years of advocacy, studies, and legal efforts, the industry is on the verge of receiving fair compensation that reflects the current market realities. This reform is expected to revitalise the sector, securing its future and continuing its legacy as a key contributor to India’s economy,” said Sanjay Kajaria, former Chairman of the Indian Jute Mills Association.