RAW JUTE PRICE STABILISATION MECHANISM IN INDIA

Fluctuation in price and availability of raw jute is the single important factor affecting the jute economy.

FLUCTUATION IN PRICE OF RAW JUTE DURING THE LAST TEN JUTE SEASONS Average Kolkata Landed Price for TD-5 Ex Other States (Fig in Rs. / Qtl) Year 1998 -99 1999200001 2001 -02 2002 -03 2003 -04 2004 -05 200506 200607 2007 -08 Maximum 1135 1110 1780 1670 990 1050 1680 1575 1510 Minimum 725 860 800 920 815 975 1200 1090 1130

PRODUCTION OF RAW JUTE / MESTA (KENAF) FOR THE LAST TEN JUTE SEASONS Figure in lakh bales of 180 kgs Year Production 1998 -99 83 1999 -2000 78 2000 -01 2001 -02 2002 -03 2003 -04 2004 -05 2005 -06 2006 -07 2007 -08 90 105 110 90 75 85 100 97

ANALYSIS OF THE REASONS FOR FLUCTUATION IN RAW JUTE PRICES AND PRODUCTION Two major forces are responsible: 1) Price received by the farmers during last jute season (-) Un-favourable Dedicate less area for cultivation (+) Favourable Dedicate more area for cultivation 2) Weather Condition at the time of sowing (-) Un-favourable Dedicate less area for cultivation / Productivity per unit area decreases (+) Favourable Dedicate more area for cultivation / Productivity per unit area increases

Raw jute price / production fluctuation matrix Price received by the farmers during last jute season Favourable Bad Un-favourable (Bad / Favourable) Uncertain Good (Bad / Favourable) Uncertain (Bad / Un-favourable) Short Crop Un-favourable (Good / Favourable) Bumper Crop Favourable Weather Condition at the time of sowing favourable Good Bad

Most jute season witness either one of the two scenarios Scenario Resultant Effect Bumper Crop Distress sale. Growers losing impetus to grow jute. Short Crop Unduly high price (mostly at the later part of the season). Adversely affecting Manufacturer’s profitability and competitiveness of jute products.

Governmental Mechanism for raw jute price stabilisation

Announcement and administration of Minimum Support Price Announcement of Minimum Support Price is a three-step procedure : 1) Keeping in view all the relevant factors, the Commission for Agricultural Cost and Prices (CACP) recommends the Minimum Support Price of TD-5 grade of jute ex. Assam. Variables Considered For Calculation of MSP Ø Cost of Cultivation Ø Productivity per unit area Ø Wage rate for agriculture labours Ø Prices of farm inputs Ø Annual Inflation Rate Ø Price of Jute Goods Ø Price parity with other crops Ø Anticipated market price Ø Emerging supply demand situation Ø Views of different stakeholders regarding MSP Ø Views of Govt. Agencies regarding MSP

2) Based on such recommendation of CACP, Govt. of India fixes the Minimum Support Price for TD-5 grade of jute ex-Assam. (Reference Price) Year TD-5 basis MSP ex-Assam (Rs, /Qtl) 1999 -200001 200102 200203 200304 200405 200506 200607 200708 200809 750 785 810 850 860 890 910 1000 1055 1250 R

3) The corresponding Minimum Support Price for other varieties and grades of raw jute across locations are fixed by the Office of the Jute Commissioner, Kolkata. States Districts Variety Grades TD 1 TD 4 TD 5 TD 6 TD 7 TD 8 W 2 W 3 W 4 W 5 W 6 W 7 W 8 Northern TD 2 + 70 TD 3 + 70 TD 4 + 140 TD 5 + 100 REF TD 5 – 70 TD 6 – 90 TD 7 – 145 Others All Districts TD 3 W 1 Assam and Meghalaya TD 2 + 70 TD 3 + 70 TD 4 + 120 TD 5 + 70 REF TD 5 – 70 TD 6 – 90 TD 7 – 145 Tossa 1630 1560 1490 1350 1250 1180 1090 945 White 1580 1510 1440 1300 1200 1130 1040 895 Rs. 685 per Qtl. While calculating the Minimum Price for other varieties and grades incentive is given to the growers for producing grades 4 and above which are in short supply in the Country.

The derivative minimum price of raw jute for different varieties / grades in baled condition landed Kolkata are then calculated Minimum Support Price of raw jute (in loose condition) + Assortment / baling / handling cost + Insurance + Interest + Freight to Kolkata + Other incidental charges Rs. 1250. 00 per Qtl. Rs. 393. 00 per Qtl. + Taxes and levies Derivative Minimum Support Price in baled condition landed Kolkata = Rs. 1643. 00 per Qtl (TD 5 ex-Assam for 2008 -09)

Administering the Minimum Support Price Jute Corporation of India (JCI) is acting as the Central Nodal Agency to undertake the Minimum Support Price operation. JCI in association with its agent Corporative, siphon the marketable surplus for arresting the downward trend in raw jute price. The jute / mesta procured by JCI / Corporative under MSP Operation is sold to the Mills in a staggered manner through out the jute season against B. Twill linked sale arrangement. Thus the MSP Operation helps in stabilising raw jute prices and ensures safe guarding the interest of both the jute growers as also the end users.

Procurement by JCI / Cooperative during last 10 years (Figure in ‘ 000 bales of 180 kgs) Year 199899 1999200001 200102 200203 200304 200405 200506 200607 200708 Procurement under Price support / (Commercial) Operation 54 107 463 246 1314 1118 352 140 483 755

Another means for stabilisation of raw jute price through Governmental effort Creation of a Buffer Stock, both on intra-seasonal and inter-seasonal basis, may bring out stability in price of raw jute. The successful operation of the scheme, on a long term, should even out seasonal fluctuation in price and supply of raw jute to the benefit of the growers of raw jute and its end users. The Commission for Agriculture Cost and Prices (CACP) in their recommendation on price policy on Raw Jute has recommended utilisation of this means for stabilisation in raw jute prices.

Extra governmental mechanism for stabilisation of raw jute prices.

Farmer - End user Partnership Approach in Raw Jute Agriculture and Marketing Creating a role for the Jute Mills in Agriculture Development / Extension and Direct Marketing in Raw Jute

Some basic reasons why jute / kenaf farmers are deprived of a remunerative price • Small and marginal growers with low bargaining power. • Reluctance to adopt new farming technologies. • Inadequate Institutional credit facility. • Gap between producers and consumers bridged by a chain of middlemen. • Imperfection in marketing structure.

Need to forge a direct linkage between the End-user (Jute Mills) and Farmers Identify an appropriate System/ Model for Farmer End-user Partnership Approach

3 Models which met with remarkable success • • ESSENTIALLY : Manufacturer's/end-users engage the farmer to plant the crop on his land. Manufacturer / end-users supply farmer with selected inputs. Harvest and deliver to the Manufacturer / end-users. Delivery may be / may not be at a predetermined price.

Model 1: Hindustan Lever Limited (HLL), Rallis & ICICI Model of Wheat Farming in M. P. Agency Service Provided Benefit accrued Rallis Agro- inputs and know how Assured Clientele of Products and Services ICICI Financing farm credit Assured Clientele of Products and Services Hindustan Buy back Lever Limited Arrangement for (HLL) farm output. Supply Chain efficiency The consortium is also planning to rope other specialist partners including insurance, equipment and storage companies.

Model 2: Pepsi. Co Model for Tomato Farming in Punjab • Focused on developing Region and Product specific research and extension services through Punjab Agricultural University (PAU) and Punjab Agro Industries Corporation Limited (PAIC). • Encouraged by sweeping success in Tomato Farming (14 - 52 tons / ha), emulated the model in food grains (Basmati Rice), Spices (Chillies), oil seeds (Groundnut) and Potato.

Model 3: Integrated Cotton Cultivation (ICC) Model of Appachi Cotton Company (ACC) (Coimbatore Dist. of Tamil Nadu) • In • Formation of farmers’ Self Help Groups • Crop loan. • Easy availability of quality seeds, fertilizers and pesticides at discounted rate. • Expert advise and field supervision • Unique selling option (no prior price fixing).

Key Learning Experience • Extension service team – locally drawn – user friendly. – available at farmers’ call • Never offer any commercially untested technology. • Ensure availability of adequate and appropriate inputs. • Agriculture implements offered free to growers – an investment that yields long term benefit • Preferably no pre fixed prices- no climate of uncertainty. • Timely payment to the farmer is a priority

Formulation of a model for Farmer Enduser partnership approach in Jute Agriculture and Marketing Key principles: principles • • • A nodal officer to implement and monitor. The participating farmers to form SHGs. A Mo. U between the Mill Co and the SHG (s) Involvement of local agencies. One village –one variety of jute seed. Supply of timely and quality farm inputs on credit. Synchronized sowing. Supply of agriculture implements free of cost Integrated crop management Payment at a price acceptable to farmers’.

Building Steps for the Model Commercialisation: • Land preparation and Planting • Crop monitoring and Crop Management • Harvesting, procurement and transportation • Prompt farmer payment system Technology Transfer : • Selection and training of extension service team • Farmer education programme • Field trial at farmer field - Multi locational crop timing R & D Activities: * Evaluation of location specific varieties. * Blue print for agriculture practices to suit local conditions, intellectual and finance means of the farmer * Demonstration farming

How the Model would benefit Farmer ØSeed money for farming. ØExposure to mechanised agro technology. ØCrop monitoring and technical advice on a regular basis - Free of Cost. ØSupply of farm inputs. ØSupply of free Agricultural Implements ØAssured market outlet of produce. End- user (Mill Company) v Uninterrupted and regular flow of raw material. v Long term planning made possible. v Dedicated supplier base. v. Generates good will for the organization.

Ultimate goal • Shift from prices to return per acre – Productivity increases. • Promote long term planning and investment. • Build up a long lasting relationship of trust and dependence between the jute farmers and the end-users.

The Model can sustain in the long run only if the initiative / empowerment comes from the farmers’ rather than the participating Mill.

FARMER END USER PARTNERSHIP APROACH VERSUS PRICE SUPPORT MECHANISM Farmer end-user partnership approach ü Planting Material Supplies ü Technology Transfer ü Assured Price ü Assured Quantity ü Free Equipment ü Partnership Approach ü Builds Commitment ü Long Term Price Support Mechanism ü None ü Minimum Guaranteed ü No Assured Quantity ü No Free Equipment ü Avail only when beneficial ü No Commitment ü Short Term

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