Dec 1, 2013

Thou shalt pack in jute

Ministry of textiles came up with an order that mandates compulsory usage of Jute as packing material for the year 2013-14, yesterday. The bright idea is to promote jute usage, in this year of jute, to help employment in Jute sector, and keep the struggling jute sector alive. It would also help jute farmers. The legal sanctity for this order comes from Jute packing material act of 1987, under which Govt is within its capacity to come up with such an order. The detailed order can be found here. Basically, it mandates that 90% of foodgrains, and 20% of sugar production must be packaged using jute products, mainly the jute gunny bags. 

The intentions are good. The recent rise of usage of High Density Polymer (HDPE) bags, and Polypropylene (PP) bags has threatened jute sector. The head-on comparison of HDPE/PP Vs Jute bags is given in the figure below: 

Taken from a study by A R Indiramma, CFTRI, Mysore

The economics for the usage of Jute no longer justifies itself. Given market choice, things might move totally towards HDPE/PP bags, as what happened in fertilizer and cement industries (mainly due to moisture issues). Sugar industry protests every-time such measures are forced on them. For example, see here. The last year economics (assuming all other things same, e.g. moisture effect, constant availability and such), for usage of jute bags work this way for sugar industry:

The Jute bags cost around Rs 35 per 50 Kg bag, which translates into cost of packing sugar at Rs 0.7 per kg. On the other hand the cost of HDPE (High Density Poly Ethylene) bag is much less. The 50 Kg HDPE bag cost Rs 15 translating into per Kg cost of packing coming to Rs 0.30. Therefore there will be an additional burden of Rs 0.40 a kg for sugar producers.

The cost benefit analysis cannot be just bare bones economics as above. Jute is an issue that involves much more, in terms of livelihood issues. Around 3.7 lakh people are directly employed in jute industry and 40 lakh farming families depend on jute. The exports of jute, in terms of quantity has mostly stagnated for the last 15 years. Production and consumption of jute has also kept constant for the last 20 years. So, all such ideas that the Govt. implemented for the last 15-20 years, including compulsory measures for usage of jute packaging, seems to have failed. 

Someone needs to step in and touch the Jute issue in the larger perspective. Compulsory measures might help in short run, but in the long run, there has to be a sustainable solution. Also, a cost-benefit analysis of such orders needs to be studied in detail.