Indian Fiber Weaves a Crisis
Wheat Stocks Are in Danger of Spoiling Amid a Shortage of Jute, the Sole Material the Country Uses to Make Commodity Bags
By BIMAN MUKHERJI And TOM WRIGHT
KOLKATA, India—For more than a century, jute made the fortune of this city, the former capital of British India. Today, scarcity of the fiber, which is made into rough-woven bags for commodities, is adding to India's failure to store its food amid widespread hunger.
Across the country, government officials are rushing to store a record wheat crop before annual monsoon rains, set to begin any day. On Thursday, Food Minister K.V. Thomas admitted that 13% of the nation's 50.2 million tons of wheat stocks were under makeshift shelters and at risk of spoiling from water.
Workers sewed jute into sacks at a mill in Jagatdal, north of Kolkata, in May.
India's high level of food waste is a national embarrassment for a country whose prime minister, Manmohan Singh, this year acknowledged that malnutrition affects 42% of children.
A dearth of warehouses, due to federal and state government bureaucratic inertia, is a crucial factor. Now, India's jute industry, which is based in the eastern city of Kolkata—formerly Calcutta—is increasingly viewed as part of the problem.
India's government in the 1980s passed a law stipulating that 100% of the annual wheat and rice crop must be packed in jute bags. The move was meant to defend the jobs of 250,000 jute factory workers, and the five million Indian farmers who grow jute, from the onslaught of cheaper plastic sacking.
But as India's wheat harvest has boomed, helped by higher quality seeds and greater availability of fertilizers, the jute industry, with its aging British-era machinery and regular labor strikes, has found it hard to keep up.
India's annual wheat crop has risen 82% since 1990, while output of jute products, including sacking, is up by a little over a third in the period.
In Madhya Pradesh, a large wheat-growing state in central India, government officials say they faced a shortage of jute bags this harvest that left them scrambling to buy plastic sacking for the crop—an emergency measure allowed to cover only 20% of a state's harvest if jute bags aren't available.
Officials in Madhya Pradesh say the situation will only get worse in future years as harvest output increases. The government, they say, should revisit the law protecting the jute industry to allow greater use of plastic bags.
"All this would be wonderful if the jute industry could cope with the demand," said Anthony de Sa, a senior bureaucrat charged with crop procurement in Madhya Pradesh.
Officials and workers point to another problem: They say some jute sacks are of poor quality. "These bags are no good. Many tear as soon as we put them down," said a laborer who was bagging up wheat recently at a government warehouse about 60 miles outside Bhopal, the state capital of Madhya Pradesh.
In Kolkata, the capital of West Bengal state, jute producers deny they have capacity constraints or quality issues. Producers blame Madhya Pradesh's government for underestimating the wheat crop, forcing the industry to rush through last-minute bag orders and causing a temporary shortage.
Jute factory owners say they fear India's plastics industry, which for years has lobbied the government to stop protecting jute, will use the bag shortages to push their case.
"The plastic lobby is very strong," said Rishav Kajaria, director of one of Kolkata's largest private-sector jute factories. "Madhya Pradesh has given them some more ammunition."
Others sense an opportunity, too. Industry representatives from Bangladesh, which is the only other country with a major jute industry, met with Indian government officials in New Delhi in May to offer to export bags to fill the shortfall in Madhya Pradesh.
But Indian officials told them they were unable to accept sacking from Bangladesh, as the jute law is meant to protect only Indian producers and farmers.
"It's some kind of protectionism," said Mushtaq Hussain, who attended the meetings and is managing director of Golden Fiber Trade Center Ltd., a Bangladesh jute trading company.
Indian producers retort that Bangladesh's jute factories, just under half of which are owned by the state, benefit from unfair export subsidies.
For years jute needed no special treatment by government.
Farmers in Bengal have used fibers from the tall jute plant for centuries to weave into bags and clothing. In the 19th century, the British set up a factory in Dundee, Scotland, to process raw jute into yarn before weaving it into bags for storing coal and other commodities.
Later, British entrepreneurs set up factories around Kolkata, building fortunes and fueling the city's growth. Many of today's largest Indian corporations, including those run by the Tata and Birla families, got their start trading jute. After the British left India in 1947, many of these traders took over the mills.
Since then, the industry, and Kolkata, has been in a slow decline. The government nationalized many of the mills in the 1970s and the industry was crippled by strikes that still plague the 60 or so mills that operate today. The government later handed most mills back to the private sector. But New Delhi continues to play a large role in the industry, setting prices and buying almost the entire output of the nation's jute producers.
Arti Kanwar, deputy jute commissioner, a Kolkata-based Indian bureaucrat whose office buys jute sacking from producers, said the government for years has supported the industry by procuring at above market prices.
But this year, she said, market prices rose above what the government pays due to large harvests. Some jute producers have reneged on contracts to sell to the government, exacerbating shortages, Ms. Kanwar added.
In Madhya Pradesh, attention is already turning to the rice harvest, due in October. Paras Jain, the state's food minister, said he was going to ask the government to procure jute bags ahead of time to avoid problems.
"We want the supply of bags in advance so we don't fall short," he said.
http://professional.wsj.com/article/SB10001424052702304441404577480341888519600.html?mg=reno64-wsj
Wheat Stocks Are in Danger of Spoiling Amid a Shortage of Jute, the Sole Material the Country Uses to Make Commodity Bags
By BIMAN MUKHERJI And TOM WRIGHT
KOLKATA, India—For more than a century, jute made the fortune of this city, the former capital of British India. Today, scarcity of the fiber, which is made into rough-woven bags for commodities, is adding to India's failure to store its food amid widespread hunger.
Across the country, government officials are rushing to store a record wheat crop before annual monsoon rains, set to begin any day. On Thursday, Food Minister K.V. Thomas admitted that 13% of the nation's 50.2 million tons of wheat stocks were under makeshift shelters and at risk of spoiling from water.
Workers sewed jute into sacks at a mill in Jagatdal, north of Kolkata, in May.
India's high level of food waste is a national embarrassment for a country whose prime minister, Manmohan Singh, this year acknowledged that malnutrition affects 42% of children.
A dearth of warehouses, due to federal and state government bureaucratic inertia, is a crucial factor. Now, India's jute industry, which is based in the eastern city of Kolkata—formerly Calcutta—is increasingly viewed as part of the problem.
India's government in the 1980s passed a law stipulating that 100% of the annual wheat and rice crop must be packed in jute bags. The move was meant to defend the jobs of 250,000 jute factory workers, and the five million Indian farmers who grow jute, from the onslaught of cheaper plastic sacking.
But as India's wheat harvest has boomed, helped by higher quality seeds and greater availability of fertilizers, the jute industry, with its aging British-era machinery and regular labor strikes, has found it hard to keep up.
India's annual wheat crop has risen 82% since 1990, while output of jute products, including sacking, is up by a little over a third in the period.
In Madhya Pradesh, a large wheat-growing state in central India, government officials say they faced a shortage of jute bags this harvest that left them scrambling to buy plastic sacking for the crop—an emergency measure allowed to cover only 20% of a state's harvest if jute bags aren't available.
Officials in Madhya Pradesh say the situation will only get worse in future years as harvest output increases. The government, they say, should revisit the law protecting the jute industry to allow greater use of plastic bags.
"All this would be wonderful if the jute industry could cope with the demand," said Anthony de Sa, a senior bureaucrat charged with crop procurement in Madhya Pradesh.
Officials and workers point to another problem: They say some jute sacks are of poor quality. "These bags are no good. Many tear as soon as we put them down," said a laborer who was bagging up wheat recently at a government warehouse about 60 miles outside Bhopal, the state capital of Madhya Pradesh.
In Kolkata, the capital of West Bengal state, jute producers deny they have capacity constraints or quality issues. Producers blame Madhya Pradesh's government for underestimating the wheat crop, forcing the industry to rush through last-minute bag orders and causing a temporary shortage.
Jute factory owners say they fear India's plastics industry, which for years has lobbied the government to stop protecting jute, will use the bag shortages to push their case.
"The plastic lobby is very strong," said Rishav Kajaria, director of one of Kolkata's largest private-sector jute factories. "Madhya Pradesh has given them some more ammunition."
Others sense an opportunity, too. Industry representatives from Bangladesh, which is the only other country with a major jute industry, met with Indian government officials in New Delhi in May to offer to export bags to fill the shortfall in Madhya Pradesh.
But Indian officials told them they were unable to accept sacking from Bangladesh, as the jute law is meant to protect only Indian producers and farmers.
"It's some kind of protectionism," said Mushtaq Hussain, who attended the meetings and is managing director of Golden Fiber Trade Center Ltd., a Bangladesh jute trading company.
Indian producers retort that Bangladesh's jute factories, just under half of which are owned by the state, benefit from unfair export subsidies.
For years jute needed no special treatment by government.
Farmers in Bengal have used fibers from the tall jute plant for centuries to weave into bags and clothing. In the 19th century, the British set up a factory in Dundee, Scotland, to process raw jute into yarn before weaving it into bags for storing coal and other commodities.
Later, British entrepreneurs set up factories around Kolkata, building fortunes and fueling the city's growth. Many of today's largest Indian corporations, including those run by the Tata and Birla families, got their start trading jute. After the British left India in 1947, many of these traders took over the mills.
Since then, the industry, and Kolkata, has been in a slow decline. The government nationalized many of the mills in the 1970s and the industry was crippled by strikes that still plague the 60 or so mills that operate today. The government later handed most mills back to the private sector. But New Delhi continues to play a large role in the industry, setting prices and buying almost the entire output of the nation's jute producers.
Arti Kanwar, deputy jute commissioner, a Kolkata-based Indian bureaucrat whose office buys jute sacking from producers, said the government for years has supported the industry by procuring at above market prices.
But this year, she said, market prices rose above what the government pays due to large harvests. Some jute producers have reneged on contracts to sell to the government, exacerbating shortages, Ms. Kanwar added.
In Madhya Pradesh, attention is already turning to the rice harvest, due in October. Paras Jain, the state's food minister, said he was going to ask the government to procure jute bags ahead of time to avoid problems.
"We want the supply of bags in advance so we don't fall short," he said.
http://professional.wsj.com/article/SB10001424052702304441404577480341888519600.html?mg=reno64-wsj
