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"We are happy as the corrigendum from the ministry has brought relief to the Rs 8,000 crore industry,” said Sanjay Kajaria, ex-Indian Jute Mills Association (IJMA) chairman and an industry veteran, soon after the news of withdrawal of excise duty came in.
"The ministry in a corrigendum to the March 24 notification maintained the exemption of excise duty on jute products, except for laminated jute bags," news agencies said on Thursday quoting official sources.
It may be recalled that in March, the Union government had slapped an excise duty of 10 per cent on branded and non-branded jute products (meant either for domestic consumption or export under the HS Code 6305), including hessian, sacking and jute soil savers), which accounts for about 80 per cent of jute industry, and threatened to cripple the fate of 205,000 workers. This was notwithstanding the fact that the Union budget had not mentioned anything.
According to jute industry watchers and experts, all export orders for jute products were put on hold following the imposition of 10 per cent excise duty. IJMA chairman M Poddar said the industry body kept on lobbying hard at various levels of the ministry and send a delegation from the industry body. The withdrawal of the excise duty can be seen as an outcome of this lobbying.
There is another school within the industry that feels that this withdrawal had always been on the cards and they knew it was coming. Their argument is: Jute comes under the category of textiles and excise duty has already been levied on branded garments; the ‘new’ excise duty could possibly be an error on the part of the finance ministry, which was to be rectified.
If withdrawal of 10 per cent excise duty on branded and non-branded jute products is encouraging news for the industry, there are some bad news as well. The jute industry is under fire from the Union ministry for food and public distribution because some jute mill owners based out of West Bengal had supplied inferior quality jute bags. It may be mentioned that the size of the annual sacking market is estimated to be close to Rs 7,500 crore. BT sacks are produced in the 66 operating mills of India, of which 52 are in West Bengal. Almost 40 per cent of the annual industry production of 1.2 million tonnes of jute bags is purchased by the government under the Jute Packaging Materials Act of 1987. On March 8, according to the ministry of food and public distribution, the director of quality assurance had pulled up a leading jute mill owner of West Bengal for supplying 626 bales of inferior quality material to the Punjab government. Subsequently, the DQA rejected eight inferior consignments from the same mill owner.
Nilanjan Dey, director, Wishlist Capital, told FC Invest, “What could possibly be more worrying for the jute industry in the country is labour shortage. Jute mills in West Bengal, one of the largest producers of jute in the country, are facing labour shortage. As a result, a number of mills have already brought down production and some of them also downed shutters, at least temporarily, to cope with the situation. Eventually, this is bound to affect the price of raw jute and jute products.”
The 52-odd jute mills and jute processing units in and around Kolkata have a capacity to employ over 400,000 people and for more reasons than one, these manufacturing units are at present facing nearly 30 per cent labour shortage, he said.
One of the important reasons for jute mill workers turning away from the jute sector is their new-found opportunity and interest in various schemes proposed by the government, such as the National Rural Employment Guarantee Act (NREGA). They want to get employed under these schemes or in other industries.
“Farmers may now have easy access to quality seeds, remunerations may be encouraging, acreage may be higher, but if jute industry is to survive and grow, it has to lure back its employees because jute is a labour-intensive industry,” said Dey.
ritwikmukherjee@mydigitalfc.com
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