Rising prices of jute goods triggered by steep raw jute prices have shrunk the export market for domestic manufacturers. A squeeze in export orders could wipe out the profitability of the mills with major export orders.
Jute goods exports have logged almost flat growth from 2010-11 (0.19 million tonne) to 2013-14 (0.21 million tonne). However, jute goods exports declined sharply in 2014-15 to 0.15 million tonne, a fall of 27 per cent.
Raw jute prices have touched an all-time high of Rs 53,000 a tonne, double the level of Rs 26,000 per tonne in the year-ago period. This has escalated prices of jute goods as well. B T prices are now at Rs 74,000 a tonne whereas Hessian has moved beyond Rs 100,000 a tonne.
“Rising prices of jute goods have both a short-term and long-term impact on the export market. While exports may not be impacted in a big way in value terms, the decline would be felt in volume terms. We have already lost major export markets like Egypt and Syria. Also, there is no incentive from the government of India unlike Bangladesh which continues to incentivise jute exports,” Manish Poddar, chairman, Indian Jute Mills Association told Business Standard.
A report by Jute Commissioner Subrata Gupta says jute mills with substantial export orders have been adversely impacted as several had contracted orders with foreign buyers without expecting such huge jump in raw jute prices.
“While on the one hand, this could wipe out profit for these mills, on the other, the increase in prices of these goods could also shrink the demand from foreign buyers. Further, the sharp increase in price of some products such as jute felt and Hessian can also adversely impact the opening up of new markets, such as those for geo-textiles and jute composites. These developments do not augur well for the health of the jute sector in the long-term,” the report adds.