Jute mills in West Bengal have sought more time to respond to notices issued last week by the antitrust watchdog on complaints from the sugar lobby that these firms artificially raised the prices of jute bags.
The Competition Commission of India (CCI) sent notices to eight jute mills in the state seeking details on their supply of jute bags to the sugar industry in 2010-11.
It gave them until 30 June to reply. The jute mills owners have asked CCI for an additional four weeks to reply.
The watchdog also asked the jute mill owners to disclose how they priced their bags, said R.K. Poddar, owner of Ganges Manufacturing Co. Ltd (GMCL), who has three jute mills in West Bengal and was issued the CCI notice.
In July last year, the Indian Sugar Mills Association (ISMA) filed a complaint with the CCI that the Indian Jute Mills Association (IJMA) and the Gunny Traders Association (GTA) had formed a nexus and were artificially manipulating prices of jute gunny bags.
Business Standard reported on the CCI notices to the jute mills on 28 June.
India manufactures around 1 million tonnes of jute bags a year, mostly for the food and sugar industries. West Bengal has 54 jute mills and accounts for 80% of the total jute production in the country. Jute is therefore a politically sensitive commodity in the state.
“The complaint of the sugar industry that jute bag makers are indulging in monopoly practices is totally baseless and self-defeating as they (sugar manufacturers) are unlawfully using alternative materials and thus evading the Jute Packaging Materials Act,” Poddar said. According to an 11 January notification issued by the textile ministry, all the foodgrain and sugar produced in the country have to be packed in jute bags manufactured by locally produced jute.
Manish Poddar, chairman, IJMA, said the sugar industry was defaulting on this obligation.
Sugar mills are required to use only jute bags for packaging but are meeting 70% of their requirement with plastic substitutes, he said.
GMCL’s Poddar said sugar mills were also dodging directives issued by the Sugar Directorate by using jute bags of 100kg in place of the mandated 50kg bags.
An ISMA executive denied this claim. He, in turn, said the jute mills were manufacturing bags of an inferior quality.
A jute bag with a capacity of 50kg should weigh 630 grams, but jute mills manufacture bags that are 100-200 grams lighter, he said. “This difference has to be made good by adding extra sugar to each bag to meet weight requirements. On an industrial scale, this counts for a lot of extra sugar,” he said.
ISMA provided data showing that the price of a 100 kg jute bag for packing sugar had increased from Rs.32-42.50 a bag in 2008-09 to Rs.55-61 a bag in 2010-11.
IJMA’s Poddar said the price of a 5kg jute bag had increased from Rs.40 four years ago to Rs.60 last year and Rs.50 now and that this was a function of the rising price of raw jute.
“Price is determined by the demand-supply situation and whatever fluctuation (in price) took place in recent times was entirely demand-driven,” he said.
Mint could not independently verify these figures.
GMCL’s Poddar said that though the GTA gives out daily indicative price quotations depending on past trends, most jute manufacturers price their products according to their own business dynamics.