Downtrend in raw jute output takes sheen off MSP hike

The government feels increase in MSP would benefit the jute industry
The latest hike in Minimum Support Price (MSP) of raw jute has little to cheer for the ailing jute industry beyond bringing marginal economic gains for farmers engaged in raising the fibre crop.

The Cabinet Committee on Economic Affairs (CCEA) Wednesday gave its nod to raise MSP of raw jute from Rs 35,000 to Rs 37,000 per tonne. The revised MSP is in line with the recommendation by the Commission for Agricultural Costs & Prices (CACP). The Commission takes into account the cost of production, overall demand-supply, domestic and international prices, inter-crop price parity, terms of trade between agricultural and non-agricultural sectors and the likely impact of MSP on the rest of the economy while recommending the MSP.

The government feels the increase in MSP would benefit the jute industry which supports the livelihood of around four million farm families and provides direct employment to 0.37 million workers in organised mills and in diversified units including tertiary sector and allied activities. These farm families are mainly concentrated in West Bengal, Bihar and Assam which account for over 95 per cent of the area as well as jute production in the country.

"For most part of the last financial year, market prices of raw jute ruled below the MSP. Of late, prices have squared up. The other worry for the industry is declining acreage and slump in raw jute production”, said an industry source.

According to government data, area under jute cultivation has seen a marked decline between 2012-13 and 2017-18 from 756,ooo hectares to 684,300 hectares. Over the comparable period, raw jute production has fallen from 11 million bales to 9.83 million bales (one bale is 180 kg).

Jute production is concentrated in the states of West Bengal, Bihar and Assam. In terms of area, West Bengal accounts for 76 per cent of the cultivated area (in 2016-17) followed by Bihar (13 per cent) and Assam (11 per cent). On raw jute production too, West Bengal is the leader, contributing 78 per cent to the total output followed by Bihar (14 per cent) and Assam (8 per cent). 

Raw jute is one of the commodities covered under the Wholesale Price Index (WPI). It has a weightage of 0.545 in the WPI with 2011-12 as the base year. 

The financial implications of the increase in MSP of raw jute would hinge on the quality of its procurement. The procurement of raw jute, in turn, would depend on market prices.