Ahmad Kaikaus, principal secretary to the prime minister, revealed the development at a media briefing in the Prime Minister's Office on Thursday.
The shutdown will send about 25,000 workers at 26 jute mills into early retirement under a scheme, euphemistically called golden handshake.
The decision came at a meeting presided over by Prime Minister Sheikh Hasina amid widespread unrest among jute mill workers over the government's decision to shut the loss-making mills.
"The prime minister was very emotional when she took the decision today," said Kaikaus.
The move forms part of the plans to modernise the loss-making jute sector and turn into a production-oriented industry under the private-public partnership model, according to Textiles and Jute Minister Golam Dastagir Gazi.
While some private jute mills are turning profits, the 26 jute mills under the Bangladesh Jute Mills Corporation have been incurring losses for years, which many have blamed on mismanagement, irregularities and corruption. The state-owned mills incurred a cumulative loss of Tk 106.74 billion, according to official data.
According to Textiles and Jute Secretary Lokman Hossain, the state-owned jute mills yielded profits in just four of the last 44 years. The government provided subsidies worth Tk 106.74 billion in this sector over the last 48 years.
Mills relied on the government to bear the operating expenses, including the wages of the workers.
HOW THE WORKERS WILL GET THE MONEY
Secretary Kaikaus said the government decided to pay at once the workers who have less than Tk 200,000 in dues.
Those with more than Tk 200,000 in dues will get half of the money in cash first and the rest in savings certificates with three-month term.
It means they will get up to Tk 74,520 in interests, the secretary said.
The workers will get Tk 1.3 million each on an average, according to him. Some will get up to Tk 5.4 million, he added.