Fraying future for farmers as Bangladesh shuts state-owned jute mills

  • Abdur Rahim Harmachi, Chief Economics Correspondent, bdnews24.com
    Published: 2020-07-18 09:51:18 BdST

Saiful Islam cultivates jute on 8 bighas of land. He and other farmers are now staring at heavy losses in the wake of the government's sudden decision to shut production at 26 state-owned jute mills amid the coronavirus crisis.

“Why are they preventing us from earning our bread by closing down the jute mills?” asked Saiful, a disgruntled farmer from Pabna's Chatmohar.

According to government data, at least 4 million farmers in the country cultivate jute. The jute industry contributes 0.26 percent of the country’s GDP, making up 1.4 percent of the agricultural output.

At present, around 750,500-800,000 hectares of land are used to produce 800,000 bales of jute fibre in the country. Jute is harvested in most districts with Pabna producing the golden fibre in 20,000 hectares of land this year.

“Last year I sold jute for Tk 2,100 per maund and increased production this year hoping to earn more. Now I hear that the price has dropped. What will I do now?” wondered Saiful.

Faridpur district has the highest jute cultivation with farmers harvesting the fibre on 84 hectares of land.

All 19 jute mills in the district are privately owned, 13 of which are currently in operation. One of the biggest private jute mills in the country, ‘Karim Jute Mill’ is situated in Faridpur. It also houses Partex Group's jute mill.

Farmers have increased jute production this year after getting a good price for the product last year, said Kartik Chandra Chakrabarty, the deputy director of Faridpur Department of Agricultural Extension. The crops are yet to be harvested, he said.

Farmers have begun harvesting jute but the products are yet to go on sale, according to Gopal Krishna Das, the deputy director at Rajbari Department of Agricultural Extension.

Abdul Kader, the deputy assistant agriculture officer of Manikganj Department of Agricultural Extension echoed Das.

He added the price of jute has dropped to Tk 1,800 from Tk 2,200 per maund.

The farmers are worried sick.

“The price is likely to fall further. The government has already closed the mills. What’ll happen to us?” Shahidul Islam, a farmer in Manikganj, told bdnews24.com.

“Production cost for a maund of jute is more than Tk 1,500. Why would someone produce it if they can’t turn a profit?”

The sudden closure of the jute mills just before the harvesting season will have a negative impact on the agriculture sector as a whole, according to economist M Asaduzzaman.

“The government's decision to shutter the jute mills came at a time when fresh jute produce is about to hit the market. Now the farmers will be unable to realise their production cost. The private mills will buy some jute but will never pay a proper price,” he told bdnews24.com.

“The farmers will suffer as they won’t get the price they deserve. Maybe some of them will set fire to their produce. This will be the scene in the upcoming jute season.”

At least 63 of the 314 state-owned jute mills have been closed down, Textile and Jute Minister Golam Dastagir Gazi said last year. This year, production at another 26 state-owned mills have been shut down. Some more jute mills have reportedly closed as well.

As the price of paddy dipped in the past few years, farmers leaned towards producing jute with hopes of securing better earnings.

Economists fear they will now lose interest in jute cultivation as the prices waver. This could spell trouble for the private jute mills as well, they warned.

“The farmers would have produced vegetables or something else if they knew the jute mills would be shut down,” said Asaduzzaman.

At least 51 percent of the jute fibre produced in the country is used in the jute mills while 44 percent are exported, according to the Department of Agricultural Extension.

Only 5 percent of the produce is used by households and cottage industries.

In the 1990s, jute was cultivated on 1.2 million hectares of land, fluctuating between 450,000 hectares and 700,000 hectares from 2010-15, according to Agriculture Information Service. It has been on the rise ever since.

However, the yields on the 700,000 hectares are much higher than before due to technological advancements, according to government officials.

At least 20 percent of the country’s population are involved in jute cultivation as well as its processing, storing, transportation and marketing.

Jute sticks left after stripping the fibres are the main source of fuel in the rural areas. A drop in jute production may result in more deforestation in a bid to collect fuel from timber, posing a big threat to the environment, according to experts.

Jute cultivation also contributes to preventing farmers from migrating to other places or switching their profession, say agriculturists.

WORKERS FACE UNCERTAINTY

Around 25,000 workers have lost their jobs to the closure of the nationalised jute mills that has left the hundreds of thousands of their family members vulnerable to distress.

They launched protests though the government promised to pay their dues under a scheme called “golden handshake” and return their jobs once the mills reopen under public-private partnership or PPP.

The workers, however, are not convinced.

“They may get some money under golden handshake, but what will happen to them and their families in future?” asked Shahidullah Chowdhury, the president of Bangladesh Trade Union Centre.

He fears the layoffs at the jute mills during the coronavirus crisis will encourage the private firms to recklessly axe jobs.

“The private companies will adopt a policy to appoint temporary workers with low wages after laying off permanent ones. It will push the entire industry sector towards instability,” Shahidullah warned.

Agro-economist Asaduzzaman has his doubts about the success of PPP.

“I don’t understand who gave the government the idea [of shutting down mills]. But I guess they want to pass everything to a few wealthy people in the name of PPP,” said the researcher at the Bangladesh Institute of Development Studies.

“I think PPP will never succeed in Bangladesh, because our businesses and entrepreneurs are different. They always take from the government, but never do anything for the country. A good example is trillions of takas in bad debts,” he added.

Minister Gazi has laid the blame entirely on Bangladesh Jute Mills Corporation or BJMC for the disastrous state of the mills.

After announcing the closure of the mills, he blamed the organisation for costing the country Tk 40 billion in lost export earnings from India due to its anti-dumping duty on Bangladeshi jute products.

Government subsidies have driven down the prices of jute products below their cost of production, which prompted India to impose the punitive tariffs, according to Gazi.

“Products that cost Tk 100 to produce are sold for Tk 70 in the country. India has imposed anti-dumping duty on our products as a result. The 30 taka loss is covered by government funds and it is damaging our local industry," he had said.

While some private jute mills are turning profits, the 26 jute mills under the Bangladesh Jute Mills Corporation have been bleeding 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 for operating costs, including the wages of the workers.

Qazi Kholiquzzaman Ahmad, who headed a committee formed in 2009 to explore ways for the expansion of the jute sector, said none of their recommendations, including turning BJMC into a public limited company, was implemented.

He blamed negligence of officials in charge of the sector and a lack of skilled manpower for the condition of the sector.

BJMC officials, however, have always cited “extra” wages as the reason behind the losses.

The ministry said the government has been paying three times the wages the private mills do after the increase in wages at the state-owned jute mills.

It led the BJMC to sell products at prices less than production cost in order to survive in the market, according to the ministry.

Worker leader Abdul Kader disagrees.

He says the government jute mills needed nearly triple the manpower of those at the private mills because of the failure to replace decades-old machinery with new ones.

Besides this, it became a practice to buy raw jute from traders during offseason instead of buying from the farmers during harvest, Kader said.

The worker leaders alleged BJMC officials colluded with the traders.

“Workers are always blamed when their wages increase slightly, but it doesn’t matter when the government officials and employees enjoy frequent and big pay hikes.

“Have the bureaucrats ever thought how the workers feed their families on a Tk 8,000 to Tk 10,000 monthly wage?” Kader asked.