Will merger of Jute Corp with Cotton Corp resolve textile procurement issues?

Now, moves are afoot to merge the Jute Corporation of India Ltd (JCI) and the Cotton Corporation of India Ltd (CCI) and thereby create a much larger, much bigger single public sector entity to take care of all textile procurement related issues. A request for proposal (RFP) has already been issued in order to appoint a consultant for the merger of both PSUs under the Ministry of Textiles, so that the entire process is fostered and the merger issue is expedited at the earliest.

Mind you that JCI was founded in 1971 as a price support agency for the procurement of raw jute/mesta from growers at the government's declared minimum support price (MSP). JCI's market presence has stabilized raw jute prices, protecting the interests of approximately four million jute farming families. Similarly, the CCI, which was established under the Union Textile Ministry one year prior to formation of JCI (that is in 1970), has over the years, been conducting price support operations whenever the market price of cotton falls below the MSP, providing a safety net to growers. Cotton cultivation employs an estimated 58 lakh farmers in the country, accounting for roughly one-fourth of global output. Nearly 52 years down the road, the government has thought it fit to merge the two entities for better results.

The RFP document says that the Government of India has proposed merging the JCI and the CCI, both of which are public sector undertakings. And a new entity with a broader scope of business covering developments of all types of textile fibres is to be formed. The proposal is in its early stages.

Now consider some facts and figures. Going by the JCI official records, the State-run jute corporation had its latest turnover stand at Rs 169.25 crore and a profit after tax (PAT) of Rs 15.39 crore in 2019-20. JCI had purchased approximately 1 lakh bales of jute in 2019-20 and was expected to purchase 0.79 lakh bales in 2020-21.

CCI, on its parts, conducts commercial purchasing operations to meet the raw material requirements of the domestic textile industry, over and above its MSP operations. CCI employs as many as 750 people.

Interestingly, the move has come at a time when the Jute Commissioner's decision to impose a price cap of Rs 6500 per quintal on raw jute and a stock limit of a maximum of 45 days, has irked jute mill owners, landing them in great problem and forcing an increasing number of jute mills go for down shutters in West Bengal. And as jute mills continue to down shutters in West Bengal, thanks to unavailability of raw materials at the price fixed by the government, the state government has blamed the Jute Commissioner for not doing enough to resolve the crisis in the mills that has caused a job loss for 60,000 workers.

Indian Jute Mills Association (IJMA), on its parts, feels that the quantity of raw jute confiscated in raids till now is a mere 803 tonne which is good for production for only six hours by all the mills. Mind you that JCI has been trying to justify its latest move by showing instances of hoardings. There are many who think that had JCI been proactive in early procurement when the crop was harvested, it would have been more fruitful. Therefore, mere merging of the two entities and creation of a new entity may not suffice. The Centre must ensure that the new entity is a stronger, much more proactive and more efficient one.