On September 2009, a sub-committee of the Union Finance Ministry submitted a confidential report on the Profitability of Jute Mills. The report concluded that net worth of mills until then had surged by 139 % and around 82 % of the mills made profits that were as high as more than 23 %. The sales turnover of 60 % of the mills had also increased by equal margins.
The five-member sub-committee was chaired by Aruna Sethi, Department of Expenditure Union Finance Ministry and consisted of the Deputy Jute Commissioner R K Pathak, S K Barman from the Tariff Commission and the former Indian jute industry chairman Manish Poddar along with INTUC representative G Sarkar.
The report gave conclusive evidence on how jute mills of Bengal had always remained in profit except for a few orchestrated strike periods. It was mostly done to a large extent through loss financing and ill payment of the workers. The jute mills had also adopted different tricks of suppressing profits and projecting losses in their ways of attaining gains out of ‘ business of sickness.’.
The technique was to refer the mills to BIFR by making subsequent losses and eroding its net worth. Money gathered from subsequent revival packages was used fraudulently to amass wealth and assets. Until date 18 jute mills of Bengal do not have proper kind of owners.
They are run by court receivers. The so-called owners are only operators and carriers or profit sharing. Almost one (1) lakh workers are unaware of their employers. Almost 28 mills of the 58 running jute mills of Bengal are under BIFR. All this was done to put a veil on the Union and state governments.
The sub-committee conducted a time series analysis and found that the ratio of profit within mills was 5: 8, which means every 5 of 8 jute mills earned profits and 4 of every 8 jute unit turned themselves into profit making units from loss-making entities. Shocked with the report Poddar resigned.
In the committee, he represented the Indian Jute Mills Association (IJMA). There were rumblings within the industry as to why Poddar did not resign before or else the industry wouldn’t have been a party to the decision. As former Secretary of IJMA, this writer was witness to all that happened within closed doors.
But surely this might not look the right forum to discuss such issues. Subsequently, the writer was sacked for opposing a few decisions that IJMA took in the later stages.
The sub-committee lamented that it confronted the paucity of accurate data. Most jute mills had stayed away from furnishing proper kinds of documents with the sub-committee. The situation has not changed in modern times.
The committee urged the industry to provide necessary information and Cost Audit Reports with the Jute Commissioner’s Office (JCO) as it was covered under the Cost Accounting Records (Jute Goods) Rules, 1975. It is to help the government carry out regular managerial functioning. None of the 19 conclusions arrived at by the sub-committee had been adhered to by the industry. Nor did the government take an initiative on a cleansing of the industry.
Keeping and supplying of records in and from jute mills have remained shady as before. Even today most jute mills are unwilling to disclose their cost audit reports. Of late, Jute Commissioner Subrata Gupta had launched a tirade to clean up the industry. Although late in the day, Gupta’s actions had sent shivers down the spine of the jute millers who are out to cheat and hoodwink the government.
In the domestic market, they are engaging agents to purchase jute bags at cheaper prices from the local markets and then supplying it to the government at higher prices. Jute Commissioner alleges that these bags are stolen from different government consignments and are unbranded by nature.
The modus operandi looks very complex and as of now there are no definite and sure routes to arrive at such conclusions. However, it also does not seem unlikely. A number of government agents and representatives are hand in glove with these traders and jute millers.
Conforming to an outdated and virtually obsolete Act, known as the Jute Packaging Mandatory Act, 1987, until now the government is the biggest consumer of jute industry.
Each agricultural season the government purchases almost 45 % the bags produced by the industry during that year for packing food grains and sugar in each agriculture season. Under terrible consumer demands and the right to make choices, the mandatory packing has been relaxed to a large extent in the case of sugar. For the past few years, the government through administrative orders had allowed only 20 % of jute bags to pack sugar.
However, 90 % jute bags are used for packing food grains. Gupta has proposed linking of statutory defaulting mills to government orders. In his opinion mills that had defaulted on paying workers’ dues would not be given or lowered government jute bag supply orders.
An almost Rs 12,000 crore industry jute mills pay the government a cess of around Rs 200 crore that goes into the Consolidated Fund of India as per National Jute Board rules. It produces around 12 lakh tonnes of jute bags (or 200 crore jute bags) of which the government purchase around 8 lakh tonnes in Kharif and Rabi seasons.
Until now, jute is the only commercial commodity that continues to be protected and subsidised by the Government. This is despite repeated recommendations from different economic and commodity panels to gradually phase out JPMA 1987. In 2013, the Prime Minister’s Economic Advisory Council (PMEAC) had specifically suggested removing sugar from the clutches of JPMA 1987. The National Fibre Policy of 2011 also recommended scrapping JPMA in tranches.
In 1998 and 2001, cement and fertiliser packing was allowed in plastics removing jute. In 2002, the Supreme Court of India upheld JPMA as an executive policy of the government.
Recently, Gupta booked 11 jute mills in different cases. Of them, 6 received show-cause notices and complaints about F.I.Rs were made against 5. All mills are contesting the charges in the courts. Gupta also received industry feedbacks to pin down illegal importers. Around 16 profit making jute mills had illegally imported low priced jute bags from Bangladesh and Nepal for government supply and re-exports. These mills had engaged hundreds of traders to work on their behalf.
To save skin and Gupta’s wrath some mills had made financial deposits with Indian Jute Industries Research Association (IJIRA) to upgrade technology. How much it could have deterred Gupta is still a matter of conjecture.
The 0.25 million (2.5 lakh) workers and 4 million farmers, however, continue remaining at the receiving end. It is over half a century since scales of pay and grades of workers have not been revised. The jute workers wage board complied in 1963. Currently, workers receive a daily payment of Rs 257 / day at the lowest level and Rs 462 / day at the highest level.
In 2011, the state government made an effort to set up a workers’ wage board committee. However, with the regime change in Bengal it remained a stillborn baby.
The illegalities of jute mills had flourished during the last three decades and the former ruling party and its government came to be known as Communist Party of India (Marwari) instead of Communist Party of India (Marxist). Jute, since inception is synonymous with the Marwari community of Kolkata, although only a very few keep maintaining links with the trade.
A silver lining for the tainted and blackened jute industry and its fibre, however, lie with an order given in mid-2016 by the Competition Commission Appellate Tribunal (COMPAT). The order set aside accusations made by plastic makers against jute industry of deceit, fraud, manipulation, price rigging and arm twisting.
Weighing the amount the darkness that has gone into jute industry over the past few decades it is unlikely that jute would be able to recover its golden flavour and would only remain as a ‘ Black Fibre’. It is genuinely difficult to stop the debacle that started in the late 60s and then early 80s when the industrial class started abandoning the industry because of impropriety and closeness. For the moment, jute might continue to remain a ‘Black Fibre’ unless some magical wand brings about a change.
A probe into the accounts of all jute mills by the Comptroller and Auditor General’s (CAG)’s office and subsequent pan India investigation can, of course, make things clear and clean for this as of now unclear and unclean industry. This needs to arrive before Prime Minister Narendra Modi announces a new Jute Policy.