Indian jute mills will earn an 8.19-per cent return on capital for supplying jute bags used in foodgrain packaging under a newly approved pricing framework by the Ministry of Textiles, a senior official confirmed. This means mills will secure a fixed percentage of profit on their investments, regardless of fluctuations in input costs, reported PTI.
According to the Indian Jute Mills Association, the revised pricing formula is expected to raise the price of gunny sacks by about 4-5 per cent. However, the Office of the Jute Commissioner estimates the benefit to range between 6 per cent and 8 per cent, factoring in adjustments recommended by the Tariff Commission.
The new pricing formula will be applied retrospectively from September 2016.
Jute Commissioner Moloy Chandan Chakrabortty said, “The overall impact of the price revision for sacking bags is estimated to be between 6-8 per cent, considering all aspects of the pricing mechanism. The return on capital has been updated to 8.19 per cent under the new guidelines, along with changes in the return policy that favour mills.”
Raghavendra Gupta of the Indian Jute Mills Association noted that the pricing structure is dynamic, and influenced by variables such as raw jute prices. He added that mills are likely to benefit in the range of 4-5 per cent.
Union Textiles Minister Giriraj Singh, during a recent visit to Kolkata, said the pricing update would also benefit around 4 lakh jute mill workers and 40 lakh farmer families involved in jute cultivation, mainly in West Bengal. He projected this year’s sale of jute products to exceed Rs 14,000 crore.
Singh urged mills to reduce dependence on government orders and focus on value addition through innovation and modernization.
The textiles ministry is investing in research and development to improve the life cycle of jute products, working towards boosting the industry, the official added.
