Last Updated : 07 November 2012 at 13:35 IST
India Jute debate: Politics should not get in way of sound economics
Source :Commodity Online Editorial Desk
Author :Rakesh Neelakandan
Rather than trading charges with the centre and saying that the measure floated by the centre would take farmer suicides to new levels, she should be scripting policies at places where the state govt. is in the driver's seat.
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West Bengal Chief Minister Mamata Banerjee is known for her fireworks and theatrics. It is no wonder that she has cracked her whip on the Central Government yet again, this time for diluting the mandatory 100% reservation for packaging of sugar and food grains in jute bag.
The State is the producer of about 82.2% of jute in the country. The decision may affect the farmers and processors of jute, as well as could bring down the price of jute in a significant way with 1.17 million tons of jute produced getting used for sacking alone, of the total output of 1.58 milion tons in jute products.
The sugar mills now need to put only 40% of their output in jute bags while 90% food grains should still be sacked in jute bags, leaving the rest to other cheaper options.
It has to be noted that alternative to jute bags--synthetic bags--are cheaper than jute bags and incur less in transportation costs due to their lower weight. Synthetic sack manufacturing units are spread throughout the country making synthetic bags availability in profusion while jute bag manufacturing units are concentrated mostly in West Bengal given economic reasons, making them less available and more costly to procure.
Now, if you are a sugar mill owner, in Maharashtra or Uttar Pradesh, would you rather opt for a jute sack or a synthetic bag?
The decision by the centre is based on sound economics. Sugar mill owners bogged down by heavy controls, would now be able to improve their margins by a better measure and trim losses. If the mills/grain processors cannot decide on what they should pack their produce in, it could be nothing short of a pathetic scenario.
One may also note that the decision by the Centre is also a compass pointing at the proposed sugar decontrol by Rangarajan panel. It is however unclear whether sugar decontrol would do away with the jute legislation--Jute Packaging Material Act, 1987--getting scrapped altogether.
Mamata Banerjee however has raised a pertinent question; the state of farmers as far as their livelihood is considered when the current de-monopolisation kicks in. Clearly, it would negatively affect farmers in the short-term. But the laws of economics would ensure what is lost to the new directive will be a gain for farmers shifting to some other commodity-based livelihood.
Rather than trading charges with the centre and saying that the measure floated by the centre would take farmer suicides to new levels, she should be scripting policies at places where the state govt. is in the driver's seat, thus benefitting farmers. She can, given her power and imagination chisel out policies that would faciliate farmers shift to other appropriate commodities and employing her integrity can make farmers rally behind her.
Ultimately, partisan politics should not be allowed to get in way of of sound economics.
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