Govt sets 8.19% return on capital for jute bag supplies in packaging

Under this, the mills will secure a fixed percentage of profit on their invested capital, irrespective of market fluctuations in input costs.

Indian jute mills are expected to earn an 8.19-per cent ‘return on capital’ for supplying jute bags for foodgrain packaging under the newly approved pricing framework by the Ministry of Textiles. This means the mills will secure a fixed percentage of profit on their invested capital, irrespective of market fluctuations in input costs.

The Indian Jute Mills Association noted that the new pricing formula will result in only a 4-5 per cent increase in the price of gunny sack supplies.

On the other hand, the Office of the Jute Commissioner projects the pricing benefit to be between 6 per cent and 8 per cent, taking into account several adjustments made in the new pricing policy following the recommendations of the Tariff Commission.

The new pricing formula will be applied retrospectively from September 2016.

Moloy Chandan Chakrabortty, Jute Commissioner, informed PTI that the total benefit impact of the current price revision for sacking bags to mills is estimated to range between 6-8 per cent, considering all aspects of the pricing mechanism. He further mentioned that the return on capital has been revised to 8.19 per cent under the new framework, and changes in the return policy have been made, all of which benefit the mills.

Raghavendra Gupta of the Indian Jute Mills Association explained that the pricing is dynamic and influenced by various factors, including raw jute prices. However, he indicated that the mills are likely to benefit from the pricing revision in the range of 4-5 per cent.

Union Textiles Minister Giriraj Singh, during a recent visit to Kolkata, remarked that the new pricing will also benefit other stakeholders, including approximately 4 lakh jute mill workers and 40 lakh farmer families involved in jute cultivation, particularly in West Bengal. He also predicted that this year’s sale of jute products would surpass Rs 140 billion.

Singh advised the mills to reduce their dependence on government supplies and to explore new opportunities driven by value addition through innovation and modernisation. He highlighted that, with the coordinated efforts of all stakeholders—government, mills, workers, and farmers—the goal is to raise the value of finished jute goods from approximately Rs 1,15,000 per tonne to Rs 2 lakh per tonne in the near future.

However, this increase in value does not apply to government gunny sack supplies, as clarified by an official.

The Ministry of Textiles has been continuously investing in research and development focused on the lifecycle of jute, or the “golden fibre,” to achieve this goal.