NEW DELHI: In a major boost to the jute sector, the government today approved mandatory packaging of sugar and foodgrains in jute material to minimum extent of up to 90 per cent of production.

A proposal for financial support to Jute Corporation of India to offset losses incurred by it on account of minimum support price operations also approved by the Cabinet Committee on Economic Affairs, an official release said.

The government approved mandatory packaging of foodgrains in jute material to the minimum extent of 90 per cent of production with certain exemptions. For sugar, minimum packaging requirement has been fixed at 20 per cent of production for jute year 2014-15.

"This preserves the position as in the past and helps the jute sector. There had been many concerns that the reservation for jute packaging would be reduced," the release said.

Both the decisions are aimed at protecting the interests of jute growers.

The financial assistance to Jute Corporation of India (JCI) will be provided in the form of subsidy.

The quantum of subsidy will include the difference between the purchase and sale price of MSP Raw Jute. The quantum of subsidy will also include fixed overhead costs incurred by JCI in maintaining its infrastructure for Minimum Support Price (MSP) operation.

"The decision will provide financial support to Jute Corporation of India to protect the interest of the jute growers through procurement of raw jute under the MSP fixed by the government and also to stabilise the raw jute market for the benefit of 40 lakh farm families and the jute economy as a whole," an official statement said.