Kolkata: Even as world leaders gather in Paris to discuss climate change, jute—the world’s most environment-friendly packaging material—is quietly yielding more ground to polypropylene in India, perhaps irreversibly.

The immediate reason: a bad crop, estimated to be 15-20% below last year’s 4.8-5 million tonnes. Making matters worse, Bangladesh banned the export of raw jute from early November.

The decline in jute production this year has sent prices soaring past Rs.5,000 a quintal and led the government to impose restrictions on stocks held by mills and traders in order to keep mills alive till next year’s crop arrives.

Even so, mills will not be able to make enough bags this year for foodgrain packaging mandatory under a 1987 law. Since its introduction, mill owners have cried foul over the law’s gradual dilution, but this year they will not be able to make enough jute bags to keep synthetic bags from making further inroads.

For jute, it will be difficult to regain the lost ground despite its environmental benefits, says jute commissioner Subrata Gupta.

According to studies used by the government, an acre under jute cultivation absorbs about six tonnes of carbon dioxide and releases four tonnes of oxygen over 120 days of growing—much more than most other crops. Jute processing uses only 7% of the energy needed to process polypropylene. But these facts don’t help sales, rue stakeholders.

Because they are significantly cheaper, synthetic bags would have by now routed jute as packaging material had the government not intervened with the 1987 law. Up to 4 million farmer families depend on jute cultivation. Mills employ another 400,000 people, according to Gupta’s office. Understandably, there is political pressure on Gupta to make sure mills don’t halt production and fire workers.

Last week, he placed a restriction on stocks: mills can only stock up to two months of raw material, and traders up to 1,700 quintals each at a time. But there are workarounds, say mill owners, asking not to be identified.

All mills combined, on average, produce 200,000 bales—or around 134,000 tonnes—of jute goods (mostly bags) a month. If they are allowed to keep up this pace, they may run out of raw material by March-April, says Gupta. That will force more mills to close down (currently, about 18 are shut across India), leading to thousands of job losses.

But efficient mills are in no mood to scale back production, even if it means some will be out of business in months. Mills with enough working capital will stock extra raw jute beyond the through proxy traders, more so as prices continue to rise. “You only need more name-lenders to play this game,” says a mill owner. “We employ thousands.” Gupta’s intervention only led to prices rising further, according to a section of mill owners. Some mills don’t mind paying more for raw jute as the government pays them based on factor costs under a “cost-plus” formula.

Gupta admits he may not have a fix for the problem of proxies, but he has mandated that from 1 December, the weight of government-procured jute bags be reduced from 665g to 580g. The new bags will use up to 12% less jute and will partly mitigate the supply disruption, he says. Still, it may not be enough to keep mills alive till the 2016 crop.