PROJECT ON SMALL SCALE ENTREPRENUERSHIP DEVELOPMENT IN DIVERSIFIED JUTE PRODUCTS CFCIJSG18 INDIA PAR

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RAW JUTE PRICE STABILISATION MECHANISM IN
INDIA
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Fluctuation in price and availability of raw jute
is the single important factor affecting the jute
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
(Fig in Rs. / Qtl)
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PRODUCTION OF RAW JUTE / MESTA (KENAF) FOR THE
LAST TEN JUTE SEASONS
Figure in lakh bales of 180 kgs
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ANALYSIS OF THE REASONS FOR FLUCTUATION IN RAW
JUTE PRICES AND PRODUCTION

• Two major forces are responsible
• Price received by the farmers during last jute
  season

(-) Un-favourable Dedicate less area for
cultivation
() Favourable Dedicate more area for
cultivation
2) Weather Condition at the time of sowing
(-) 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
Price received by the farmers during last jute
season
Good
Bad
Favourable
Favourable
Weather Condition at the time of sowing
favourable
Un-favourable
Un-favourable
Bad
Good
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Most jute season witness either one of the two
scenarios
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Governmental Mechanism 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
• Keeping in view all the relevant factors, the
  Commission for Agricultural Cost and Prices
  (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)
R
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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.
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.
(TD5 ex-Assam for 2008-09)

Assortment / baling / handling cost

Insurance

Interest

Rs. 393.00 per Qtl.
Freight to Kolkata

Other incidental charges

Taxes and levies
Derivative Minimum Support Price in baled
condition landed Kolkata

Rs. 1643.00 per Qtl
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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)
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Another means for stabilisation of raw jute price
through Governmental effort

• 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.

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Extra governmental mechanism for stabilisation of
raw jute prices.
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Farmer - End user Partnership Approach in Raw
Jute Agriculture and Marketing

• Creating a role for the Jute Mills in Agriculture
  Development / Extension and Direct Marketing in
  Raw Jute

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Some basic reasons why jute / kenaf farmers are
deprived of a remunerative price

• Small and marginal growers with low bargaining
  
• power.
• Reluctance to adopt new farming technologies.
• Inadequate Institutional credit facility.
• Gap between producers and
• consumers bridged by a chain of middlemen.
• Imperfection in marketing structure.

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Need to forge a direct linkage between the
End-user (Jute Mills) and Farmers Identify an
appropriate System/ Model for Farmer End-user
Partnership Approach
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3 Models which met with remarkable success

• ESSENTIALLY
• Manufacturer's/end-users engage the 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.
The consortium is also planning to rope
other specialist partners including insurance,
equipment and storage companies.
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Model 2PepsiCo Model for Tomato Farming in
Punjab

• Focused on developing Region and Product specific
  research and extension services through Punjab
  Agricultural University (PAU) and Punjab Agro
  Industries Corporation Limited (PAIC).
• Encouraged by sweeping success in Tomato Farming
  (14- 52 tons / ha), emulated the model in food
  grains (Basmati Rice), Spices (Chillies), oil
  seeds (Groundnut) and Potato.

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Model 3 Integrated Cotton Cultivation (ICC)
Model of Appachi Cotton Company (ACC) (Coimbatore
Dist. of Tamil Nadu)

• In

• Formation of farmers Self Help Groups
• Crop loan.
• Easy availability of quality seeds, fertilizers
• and pesticides at discounted rate.
• Expert advise and field supervision
• Unique selling option (no prior price fixing).

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Key Learning Experience

• Extension service team
• locally drawn
• user friendly.
• available at farmers call
• Never offer any commercially untested technology.
• Ensure availability of adequate and appropriate
  inputs.
• Agriculture implements offered free to growers
• an investment that yields long term benefit
• Preferably no pre fixed prices- no climate of
  uncertainty.
• Timely payment to the farmer is a priority

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Formulation of a model for Farmer End-user
partnership approach in Jute Agriculture and
Marketing

• Key principles
• A nodal officer to implement and monitor.
• The participating farmers to form SHGs.
• A MoU between the Mill Co and the SHG (s)
• Involvement of local agencies.
• One village one variety of jute seed.
• Supply of timely and quality farm inputs on
  credit.
• Synchronized sowing.
• Supply of agriculture implements free of cost
• Integrated crop management
• Payment at a price acceptable to farmers.

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Building Steps for the Model

• Commercialisation
• Land preparation and Planting
• Crop monitoring and Crop Management
• Harvesting, procurement and transportation
• Prompt farmer payment system

• Technology Transfer
• Selection and training of extension service
  team
• Farmer education programme
• Field trial at farmer field - Multi locational
  crop timing

• 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

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How the Model would benefit
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Ultimate goal

• Shift from prices to return per acre
  Productivity increases.
• Promote long term planning and investment.
• Build up a long lasting relationship of trust and
  dependence between the jute farmers and the
  end-users.

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The Model can sustain in the long run only if the
initiative / empowerment comes from the farmers
rather than the 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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