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RAW JUTE PRICE
STABILISATIONMECHANISMIN INDIA
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Fluctuation in priceFluctuation in price
and availability ofand availability ofraw jute is the singleraw jute is the singleimportant factorimportant factor
affecting the juteaffecting the juteeconomy.economy.
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FLUCTUATION IN PRICE OF RAW JUTE DURING THE
LAST TEN JUTE SEASONS
Average Kolkata Landed Price for TD-5 Ex Other States
Year 1998-99
1999-2000
2000-01 2001-02
2002-03
2003-04
2004-05
2005-062006-07 2007-08
Maximum 1135 1110 1780 1670 990 1050 1680 1570 1575 1510
Minimum 725 860 800 920 810 815 975 1200 1090 1130
(Fig in Rs. / Qtl)
0
500
1000
1500
2000
1998-
99
1999-
2000
2000-
01
2001-
02
2002-
03
2003-
04
2004-
05
2005-
06
2006-
07
2007-
08
Year
Price
Maximum
Minimum
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PRODUCTION OF RAW JUTE / MESTA (KENAF)FOR THE
LAST TEN JUTE SEASONS
Figure in lakh bales of 180 kgs
Year 1998-99
1999-2000
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
Production 83 78 90 105 110 90 75 85 100 97
0
20
40
60
80
100
120
1998-
99
1999-
2000
2000-
01
2001-
02
2002-
03
2003-
04
2004-
05
2005-
06
2006-
07
2007-
08
Year
Value
Production in lakh bales
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ANALYSIS OF THE REASONS FOR
FLUCTUATION IN RAW JUTE PRICES AND
PRODUCTION
Two major forces are responsible:
1) Price received by the farmers during last jute season
2) Weather Condition at the time of sowing
(-)Un-favourable
Dedicate less
area for
cultivation
(+)Favourable
Dedicate more
area for
cultivation
(-)
Un-favourable
Dedicate less area for
cultivation / Productivity
per unit area decreases
(+)
Favourable
Dedicate more area for
cultivation/ Productivity
per unit area increases
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Raw jute price / production fluctuation matrix
(Good / Favourable)
Bumper Crop
(Bad / Favourable)
Uncertain
(Bad / Favourable)
Uncertain
(Bad / Un-favourable)
Short Crop
Good Bad
Price received by the farmers during last jute season
Good Bad
Favourable
Un-favourable
Un-f
avo
ur
ab
le
Fa
vou
ra
ble
WeatherConditiona
tthetime
ofsowingfavourabl e
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Most jute season witness either one of the
two scenarios
Scenario Resultant Effect
Bumper Crop Distress sale. Growers losing impetus to grow jute.
Short Crop Unduly high price (mostly at the later part of theseason). Adversely affecting Manufacturers
profitability and competitiveness of jute products.
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GovernmentalMechanism for raw
jute price stabilisation
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Announcement and administration of Minimum Support Price
Announcement of Minimum Support Price is a three-step procedure :
1) Keeping in view all the relevant factors, the Commission for Agricultural Cost andPrices (CACP) recommends the Minimum Support Price of TD-5 grade of jute ex-Assam.
Variables Considered For Calculation of MSP
Cost of Cultivation Productivity per unit area Wage rate for agriculture labours Prices of farm inputs
Annual Inflation Rate Price of Jute Goods Price parity with other crops Anticipated market price Emerging supply demand situation Views of different stakeholders regarding MSP
Views of Govt. Agencies regarding MSP
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2)Based on such recommendation of CACP, Govt. of India fixes the Minimum
Support Price for TD-5 grade of jute ex-Assam. (Reference Price)
Year 1999-2000
2000-01 2001-02 2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
TD-5 basis MSPex-Assam(Rs,/Qtl)
750 785 810 850 860 890 910 1000 1055 1250
R
0
200
400
600
800
1000
1200
1400
1999
-2000
2000-
01
2001-
02
2002-
03
2003-
04
2004-
05
2005-
06
2006-
07
2007-
08
2008-
09
Year
Value
Rs. / Qtl. On TD-5 basis
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3) The corresponding Minimum Support Price for other varieties and grades of raw
jute across locations are fixed by the Office of the Jute Commissioner, Kolkata.
States Districts Variety Grades
TD1 TD2 TD3 TD4 TD5 TD6 TD7 TD8
W1 W2 W3 W4 W5 W6 W7 W8
Northern TD2 +70
TD3 +70
TD4 +140
TD5 +100
REF TD5 70
TD6 90
TD7 145
Others TD2 +70
TD3 +70
TD4 +120
TD5 +70
REF TD5 70
TD6 90
TD7 145
Assam andMeghalaya
AllDistricts
Tossa 1630 1560 1490 1350 1250 1180 1090 945
White 1580 1510 1440 1300 1200 1130 1040 895
Rs. 685 per Qtl.
While calculating the Minimum Price for other varieties and grades incentive is
given to the growers for producing grades 4 and above which are in short supply in
the Country.
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The derivative minimum price of raw jute for different
varieties / grades in baled condition landed Kolkata are then
calculated
Minimum Support Price of raw jute (in loose condition) Rs. 1250.00 per Qtl.
+
+
+
+
+
+
Assortment / baling / handling cost
Insurance
Interest
Freight to KolkataRs. 393.00 per Qtl.
Other incidental charges
Taxes and levies
Derivative Minimum Support Price in baled
condition landed Kolkata = Rs. 1643.00 per Qtl
(TD5 ex-Assam
for 2008-09)
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Administering the Minimum Support Price
Jute Corporation of India (JCI) is acting as the Central Nodal Agency to
undertake the Minimum Support Price operation.
JCI in association with its agent Corporative, siphon the marketable
surplus for arresting the downward trend in raw jute price.
The jute / mesta procured by JCI / Corporative under MSP Operation is
sold to the Mills in a staggered manner through out the jute season
against B. Twill linked sale arrangement.
Thus the MSP Operation helps in stabilising raw jute prices and
ensures safe guarding the interest of both the jute growers as also the
end users.
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Procurement by JCI / Cooperative during last 10 years
(Figure in 000 bales of 180 kgs)
Year 1998-99
1999-2000
2000-012001-02 2002-03 2003-04 2004-052005-062006-072007-08
ProcurementunderPrice support /(Commercial)Operation
54 107 463 246 1314 1118 352 140 483 755
0
200
400
600
800
1000
1200
1400
1998-
99
1999-
2000
2000-
01
2001-
02
2002-
03
2003-
04
2004-
05
2005-
06
2006-
07
2007-
08
Year
Value
Procurement in '000
bales
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Creation of a Buffer Stock, both on intra-seasonal and inter-seasonal
basis, may bring out stability in price of raw jute.
The successful operation of the scheme, on a long term, should even out
seasonal fluctuation in price and supply of raw jute to the benefit of the
growers of raw jute and its end users.
The Commission for Agriculture Cost and Prices (CACP) in their
recommendation on price policy on Raw Jute has recommended
utilisation of this means for stabilisation in raw jute prices.
Another means for stabilisation of raw jute price
through Governmental effort
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Extra governmental mechanism
for stabilisation of raw juteprices.
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Farmer - End user PartnershipFarmer - End user PartnershipApproach in Raw Jute AgricultureApproach in Raw Jute Agriculture
and Marketingand Marketing
Creating a role for the Jute Mills inAgriculture Development / Extension
and Direct Marketing in Raw Jute
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Small and marginal growers with low bargainingSmall and marginal growers with low bargaining
power.power. Reluctance to adopt new farming technologies.Reluctance to adopt new farming technologies.
Inadequate Institutional credit facility.Inadequate Institutional credit facility.
Gap between producers andGap between producers and
consumersconsumersbridged by a chain of middlemen.bridged by a chain of middlemen. Imperfection in marketing structure.Imperfection in marketing structure.
Some basic reasons why jute / kenaf
farmers are deprived of a remunerative
price
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Need to forge a direct linkageNeed to forge a direct linkagebetween the End-user (Jute Mills)between the End-user (Jute Mills)and Farmersand Farmers
Identify an appropriate System/Model for Farmer End-userPartnership Approach
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3 Models which met with3 Models which met with
remarkable successremarkable success
ESSENTIALLY :
Manufacturer's/end-users engagethe farmer to plant the crop on his
land. Manufacturer / end-users supply
farmer with selected inputs.
Harvest and deliver to the
Manufacturer / end-users . Delivery may be / may not be at a
predetermined price.
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Model 1: Hindustan Lever Limited (HLL), Rallis
& ICICI Model of Wheat Farming in M. P.AgencyAgency Service ProvidedService Provided Benefit accruedBenefit accrued
RallisRallis Agro- inputs andAgro- inputs andknow howknow how
Assured Clientele ofAssured Clientele ofProducts and ServicesProducts and Services
ICICIICICI Financing farmFinancing farmcreditcredit
Assured Clientele ofAssured Clientele ofProducts and ServicesProducts and Services
HindustanHindustan
Lever LimitedLever Limited(HLL)(HLL)
Buy backBuy back
Arrangement forArrangement forfarm output.farm output.
Supply ChainSupply Chain
efficiencyefficiency
The consortium is also planning to rope other specialist partnersThe consortium is also planning to rope other specialist partners
including insurance, equipment and storage companies.including insurance, equipment and storage companies.
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Model 2:PepsiCo Model for TomatoModel 2:PepsiCo Model for Tomato
Farming in PunjabFarming in Punjab
Focused on developing Region and ProductFocused on developing Region and Productspecific research and extension servicesspecific research and extension servicesthrough Punjab Agricultural University (PAU)through Punjab Agricultural University (PAU)and Punjab Agro Industries Corporationand Punjab Agro Industries Corporation
Limited (PAIC).Limited (PAIC).
Encouraged by sweeping success in TomatoEncouraged by sweeping success in TomatoFarming (14- 52 tons / ha), emulated the modelFarming (14- 52 tons / ha), emulated the modelin food grains (Basmati Rice), Spicesin food grains (Basmati Rice), Spices(Chillies), oil seeds (Groundnut) and Potato.(Chillies), oil seeds (Groundnut) and Potato.
o e : n egra e o on:
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o e : n egra e o on:Cultivation (ICC) Model of AppachiCultivation (ICC) Model of Appachi
Cotton Company (ACC)Cotton Company (ACC)
(Coimbatore Dist. of Tamil Nadu)(Coimbatore Dist. of Tamil Nadu) InFormation of farmers Self HelpFormation of farmers Self Help
GroupsGroups
Crop loan.Crop loan.
Easy availability of qualityEasy availability of quality
seeds, fertilizersseeds, fertilizers
and pesticides at discountedand pesticides at discounted
rate.rate.
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Key Learning ExperienceKey Learning Experience
Extension service teamExtension service team
locally drawnlocally drawn user friendly.user friendly.
available at farmers callavailable at farmers call
Never offer any commercially untested technology.
Ensure availability of adequate and appropriate inputs.Ensure availability of adequate and appropriate inputs.
Agriculture implements offered free to growersAgriculture implements offered free to growers
an investment that yields long term benefitan investment that yields long term benefit
Preferably no pre fixed prices- no climate of uncertainty.Preferably no pre fixed prices- no climate of uncertainty.
Timely payment to the farmer is a priorityTimely payment to the farmer is a priority
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Formulation of a model for Farmer End-Formulation of a model for Farmer End-
user partnership approach in Juteuser partnership approach in Jute
Agriculture and MarketingAgriculture and Marketing
Key principlesKey principles:
A nodal officer to implement and monitor.A nodal officer to implement and monitor. The participating farmers to form SHGs.The participating farmers to form SHGs. A MoU between the Mill Co and the SHG (s)A MoU between the Mill Co and the SHG (s) Involvement of local agencies.Involvement of local agencies. One village one variety of jute seed.One village one variety of jute seed. Supply of timely and quality farm inputs on credit.Supply of timely and quality farm inputs on credit.
Synchronized sowing.Synchronized sowing. Supply of agriculture implements free of costSupply of agriculture implements free of cost Integrated crop managementIntegrated crop management Payment at a price acceptable to farmers.Payment at a price acceptable to farmers.
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R & D Activities:
Evaluation of location specific varieties. Blue print for agriculture practices to suit local conditions,
intellectual and finance means of the farmer
Demonstration farming
Technology Transfer :
Selection and training of extension service team Farmer education programme Field trial at farmer field - Multi locational crop timing
Commercialisation:
Land preparation and Planting Crop monitoring and Crop Management Harvesting, procurement and transportation Prompt farmer payment system
Building Steps for the ModelBuilding Steps for the Model
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How the Model would benefit
FarmerFarmer End- user (Mill Company)End- user (Mill Company)
Seed money for farming.Seed money for farming.Exposure to mechanisedExposure to mechanised
agro technology.agro technology.
Crop monitoring andCrop monitoring and
technical advice on atechnical advice on a
regular basis - Free of Cost.regular basis - Free of Cost.
Supply of farm inputs.Supply of farm inputs.
Supply of free AgriculturalSupply of free Agricultural
ImplementsImplements
Assured market outlet ofAssured market outlet of
produce.produce.
Uninterrupted andUninterrupted andregular flow of rawregular flow of raw
material.material.
Long term planningLong term planningmade possible.made possible.
Dedicated supplier base.Dedicated supplier base.
Generates good will forGenerates good will for
the organization.the organization.
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Shift from prices to return per acre Shift from prices to return per acre
Productivity increases.Productivity increases.
Promote long term planning andPromote long term planning andinvestment.investment.
Build up a long lasting relationship ofBuild up a long lasting relationship of
trust and dependence between the jutetrust and dependence between the jutefarmers and the end-users.farmers and the end-users.
Ultimate goal
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The Model can sustain in theThe Model can sustain in the
long run only if the initiative /long run only if the initiative /
empowerment comes from theempowerment comes from thefarmers rather than thefarmers rather than the
participating Mill.participating Mill.
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FARMER END USER PARTNERSHIP APROACH
VERSUS PRICE SUPPORT MECHANISM
Farmer end-user
partnership approach
Price Support
Mechanism
Planting Material Supplies Technology Transfer Assured Price Assured Quantity Free Equipment
Partnership Approach Builds Commitment Long Term
None None Minimum Guaranteed No Assured Quantity No Free Equipment
Avail only when beneficial No Commitment Short Term
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