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A SWOT analysis of Indian jute industry

Despite its fortune on decline, jute is an emerging niche market with plenty of opportunities for growth and the future of jute lies in its scope of work, declare Pooja Sharma, Neeraj Kaushik and K N Chaterjee, mooting proposals for the industry's revamp. Twenty-first century witnessed a new resurgent and resolute Indian industry in terms of volume as well as in quality. India has become a hub of not only Information Technology, Textile, Bio-Technology but also of Leather, Automobile and other Industries. India experienced the economic growth of 8 - 9% per annum. The progress of industry has not been achieved overnight but it is the effect of sustained and gradual efforts by the government & its associate bodies. Textile & garment industry is among the second highest employment provider in India after agriculture. It is the mother industry in India, like most of the industrialised nations, and given the present economic development, it has the potential to propel the economy at least for next few decades. With the ATC (Agreement on Textile & Clothing) agreement under WTO (World Trade Organisation), the global textile industry is presenting enormous potential, at the same time challenges for nations. Traditionally India's core competence is in garment sector, however increasing competition necessitates her to explore new arena and develop her competence there. Jute industry in this regard presents a vast scope. Jute exists in nature as weeds. The word jute was used by Roxburgh, Superintendent, Botanical Garden, Shibpur, West Bengal in 1795 in his letter to the Board of Directors, East India Company. At that time Oriya word 'Jote' or 'Jhuta' was used for this type of fibre. Thus, the word jute was the anglicised version of these words. Jute is a natural vegetable fibre under the category of bast fibres like flax, hemp, kenaf and ramie. Jute is annually renewable plant belonging to the genus Corchorus of the order Tiliacea. For commercial use two species, viz, Corchorus olitorious and Corchorus capsularis, commonly known as Tossa and white jute respectively are produced Historical perspective of jute industry in India In the year 1832 - 33, a spinner in Dundee, UK successfully spun jute yarn of acceptable quality using machinery in blends with other fibres. After a year or two, 100% jute yarn was spun easily by applying whale oil and water in the process. Later in 1855, the first jute mill was established in India, near the present Hasting Jute Mill [2]. In a span of 10 years Indian jute goods took over the Dundee jute goods in world market. Thus started decline of Dundee jute mills and last mill was closed down in 1996. At present, an average of 9,71,000 hectares of land is under raw jute cultivation, and the production of raw jute has been 10,940 thousand bales for last four years. There are 77 jute mills in India out of which 60 are in West Bengal followed by Andhra Pradesh where 7 mills are established. The average production of jute has been 1,597 thousand tons per year and its domestic demand has been 1,372 thousand tons per annum. There are 9 units of jute which are working as 100% export oriented units, and the average export of jute for last four years have been 286 thousand tons or Rs 10,746 million per annum[3] .
[1]

S No 1.

Jute Exports of India from April-December 2006 to April-December 2007 Value in Crores Item April-Dec 06 April- Dec 07 Floor Covering of Jute 235.99 211.44

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Other Jute Manufactures 216.35 Jute Yarn 221.01 Jute Hessian 331.62 Total Jute Exports 1004.97 (Source: http://texmin.nic.in/ermiudel/Export-11th%20plan%20Eng.pdf)

2. 3. 4.

239.15 158.73 349.21 958.53

Exports of jute during the year 2004 - 05 were US$ 0.267 billion recording a growth of 14% as compared to year 2003 04. During the year 2005 - 06 the exports were US$ 0.295 billion with a increase of 6.64% from the year 2004 - 05. During the first quarter of 2006 - 07 the jute exports amounted to US$ 0.065 billion, with a decline of 7.79% over the exports during the corresponding period of 2005 - 06 [4].

World Production of Jute and Allied Fibres: Country-wise Jute & Allied Fibres Production (Quantity: 000 tonnes) Country India 1994-95 1395.4
(44.81)

1995-96 1458.0
(53.36)

1996-97 1836.0
(51.03)

1997-98 2000.7
(51.87)

1999-00 1841.0
(57.87)

2000-01 1621.6
(62.20)

898.4 Bangladesh
(28.85)

652.7
(23.89)

1062.2
(30.27)

1242.7
(31.7)

851.9
(26.78)

630.0
(24.16)

548.5 China
(17.61)

371.2
(13.59)

364.9
(10.40)

429.5
(10.96)

248.0
(7.79)

176.0
(6.75)

136.5 Thailand
(4.38)

114.9
(4.20)

109.3
(3.1)

106.4
(2.71)

101.7
(3.20)

55.9
(2.14)

34.4 LatinAmerica
(1.1)

29.3
(1.07)

31.0
(0.88)

28.8
(0.73)

27.1
(0.85)

26.5
(1.02)

33.4 Myanmar
(1.07)

43.0
(1.57)

39.5
(1.12)

33.1
(0.84)

33.5
(1.05)

30.0
(1.15)

20.6 Vietnam
(0.07)

14.8
(0.54)

15.0
(0.43)

22.3
(0.57)

18.6
(0.58) (0.35)

9.1

10.9 Nepal
(0.04)

15.0
(0.55)

14.0
(0.40)

15.5
(0.40)

15.2
(0.48)

14.0
(0.53)

10.7 Africa
(0.03)

13.2
(0.48)

13.9
(0.40)

14.2
(0.36)

13.8
(0.43)

13.7
(0.52)

25.3 Others WorldProduction

(0.08)

20.0
(0.73)

23.7
(0.68)

133.4
(3.40)

30.6
(0.96)

30.2
(1.15)

3114.1

2732.1

3509.5

3920.3

3181.4

2607.0

(Figures in parenthesis are % of total world production) (Source: FAO, Rome)

Jute Industry: Growth & Decline Till 1947 Indian jute mills dominated the world jute market with 70% of its products finding place in the global market. It was after the partition in 1947 when almost all jute producing area went under East Pakistan (now Bangladesh) causing decline to Indian jute market. At the same time, major jute consuming nations switched to bulk handling systems and developed alternate synthetic packing materials. Two other issues faced by Indian jute industry were: (a) Dependence for raw jute on East Pakistan. (b) Rapid decline of export market. Gradually, jute goods exports declined by 30% from 70%. In spite of constraints, jute goods production showed a gradual increment. In 1947, the total jute production was 10 lakhs MT and the same figure was 16.2 lakhs in 2003 MT respectively
[6]

. In five decades, Indian Jute industry expanded by 62%. In recent times plastic bags substituted jute bags and thus

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jute was in the verge of extinction. In order to revamp jute industry, in 1987 Government of India reserved the packing of traditional commodities, viz, sugar, food grains with jute material by proclaiming the Mandatory Jute Packaging Act (PJMA) 1987. Today PJMA is restricted to 100% coverage for sugar & foodgrains, which is the main bread earner for the industry. Now, in the face of multidimensional threats this industry is again confronted with danger of extinct. SWOT analysis of Indian jute industry For the successful revamp of Indian Jute Industry, a turnaround strategy is the need of the hour. The authors have endeavoured to critically analyse the strengths, weaknesses, opportunity and threats (SWOT Analysis) of this industry. Strength: (i) Jute is a labour intensive industry, which engages 4.35 million people
[7]

(ii) Jute industry has lot of potential of providing employment especially in East Indian region. The industry offers employment opportunity to 7,500 persons per year, besides more opportunity lie ahead in expansion of existing capacity in new mills that are coming up in SSI and MSI[8]. (iii) Jute is an eco-friendly and biodegradable product. With the pressure from green movement, it is going to sustain through consumer's preference. Weakness: (i) Frequent revision of PJMA guidelines (to add or dilute items for jute packing) leaves the industry in confusion whether to invest further on the Jute technology development/product development/market expansion or wait for new policies etc. (ii) Though jute industry is a labour intensive, wages represent 35% of total conversion cost of jute industry, which evades the profit margins
[9]

(iii) Multi unionism is one of the major problems faced by jute industry and engages major concentration of routine management in resolving labour dispute. (iv) The machinery used in jute industry is old and obsolete with age of machinery ranging between 40 - 150 years. They have lost their capacity to produce quality products and in spite of routine maintenance, fail to yield standard machine production. In fact, the 150 years old industry with 75% obsolete machinery is tagged as "Sunset industry" with "Vintage machinery". Though National Jute Policy, 2005, aims at revamping the domestic jute industry through modernisation & by upgrading technology, only a few mills could utilise the fund provided by Jute Manufacturers and Development Council (JMDC) for modernising their plant and machinery plant partly. Thus JMDC had to return major part of the fund, ie, Rs 80 crores after using less than Rs 10 crores. The Government has ear-marked Rs 75 lakhs per year per mill for capital investment in modernisation but industry feels it is inadequate for an average mill and wants it to be raised to Rs 2 crores
[10]

(v) Another weakness of jute industry is poor Research & Development (R&D) initiation, invention/reverse engineering effort has been grossly neglected in this sector. The reasons for this are lack of farsightedness & forward planning on the part of government and industry. (vi) Marketing has been another weak point of jute industry. It has been maintaining a very slow pace in coming out of traditional way of marketing. Time has come for the industry to think how to market this versatile, eco-friendly and natural fibre. Government can only give initiation in product development and test marketing but the follow-up rests on the industry. (vii) Within the country, wage for workers varies from Rs 50 - Rs 250 per manday. Government must take immediate steps in this concern and formulate need based wage structure for jute sector. While doing so, there should be productivity linked payment. Payment by result is a universally accepted phenomenon and accepted by ILO. Trade Unions in the jute sector agree on it but at plant level, same unions resist, thereby causing labour productivity to be lower than standard
[11]

(viii) Indian jute has not been able to build brand image for jute that goes with the quality. Opportunity: (i) In many areas Indian Jute industry is ahead of other jute producing and manufacturing countries viz. (a) It has learned how to upgrade a lower grade fibre in the batch mix. (b) It also leads in diversified value added products. (ii) The Government at the centre and at state has pro-jute mindset. They have plans for taking jute industry to new horizon. This is evident from National Jute Policy 2005 which targets to reach export Rs 5,000 crores in the 11th fine year plan from present amount of Rs 1,000 crores. (ii) Brazil is one of the major importers of Indian Jute, and is estimated to have a market of 25,000 tonnes of foodgrains, and few of Indian jute bag producers have been awarded zero duty which opens new doors to other industry producers[12].

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(iii) Industry should accomplish Total Quality Management so as to build quality in the products. Threats: (i) One of the major threats faced by Indian jute industry/producers is from Bangladesh Jute industry, which is armed with 7% cash subsidy on all items of jute products without any string[13]. (ii) Withdrawal of Export Subsidy Assistance (ESA) from 1 April, 2007 has been a setback to the export of Indian Jute industry. (iii) The Union Cabinet Committee for Economic Affairs (EA) has approved the continuation of Technical Upgradation Fund Scheme (TUFS) for next 5 year plan 2007 - 12 for Indian Textile industry including jute industry. The size of investment is projected at Rs 1,506 crores for this period but it is understood that jute sector may not get its due share from TUFS money, particularly for jute machinery modernisation and for upgrading technology[14]. (iv) The Department of Food and Public Distribution (DFPD) has issued orders for packaging paddy and coarse grains in used gunny bags which is a violation of Jute Packaging Material Act, 1987, which is considered as threat by jute industry. (v) As the synthetic lobby is gaining power there is a pressure on government to dilute jute reservation norms from existing 70% to 30% for grains and from 75% to 25% for sugar. Though the government has not made the revision yet, this pressure on government is a threat to jute industry
[15]

(vi) Recent government decision to withdraw 10% import duty on jute and jute products to nil with effect from January 1, 2008, is seen as a threat by the industry[16] . Solutions to overcome the present crisis of the jute industry: The competitive environment that international business face is, to a certain extent, a function of technological environment and the degree of technological innovations attributed to the competitive environment. With markets and competition going global, firms and nations are trying to understand the implications for their competitive strategies. Indian Jute industry may cogitate following suggestion: (i) Jute is a golden fibre. Being a natural, bio-degradable and eco-friendly fibre, jute can be blended with other compatible fibres for providing better physical, chemical, thermal, comfort and other important properties required for other applications. (ii) The inherent negative surface characteristics of jute fibres like itching problem, comfort characteristics, etc, can be modified through bio-technology and scientific techniques. (iii) Till today, jute fibre is being considered as a cheap fibre, and its uses are only restricted to the jute granny bags, lowquality house-hold articles. It is the requirement of the whole world for producing value added products out of jute material. (iv) The application area of jute need to be enlarged, ie, jute should be used in new areas like agro-textile, geo-textile, technical textile as well as home textile. (v) Marketing and promotion of jute has been a major problem, and so the government and industry should come forward and take adequate steps in this direction like highlighting its eco-friendly and biodegradable characteristics. (vi) Labour problem is one of the major problems faced by the jute industry. For its solution government and industry should device a tri-party agreement between government, mill owners and the trade unions, so as to overcome loss of work by strikes, lockouts, law off, closure of mill, etc. (vii) Jute Research Association such as JTRL, IJIRA, Institute of Jute Technology should come forward for better utilisation of resources like jute raw material, manpower and machinery and equipment for the betterment of jute industry. The future of jute lies in its scope of work. A detailed research by government organisations like JRTL, IJIRA and Institute of Jute Technology, Research Scholars and students in the following areas like Survey on Raw Material, Survey on Fibre and Survey on Marketing need to be undertaken. Research on cultivation and marketing of jute, jute fibre, jute promotion and jute blended products is required to be done, not merely to enhance the sphere of jute but also to give the industry a new zone to expand. The Indian jute industry is having lots of opportunity by its side; It is not only one of the oldest industries of India but also among the major employer of the nation. There are a lot of strengths and also much opportunity to grab them but it could only be done if it overcomes its weaknesses and threats. Jute, the golden fibre, has a potential of reaching the height where it used to be in the past, but it is only possible through constant efforts by government and a proper follow-up by the industry. After all, converting your threats into your opportunities is the success mantra for the millennium. References 1. Roy Tamal and Sur Debanjan (2003): Hand Book On Jute, Indian Jute Industries' Research Association, Kolkata. 2. ibid.

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3. http://texmin.nic.in/ermiudel/indian_jute.pdf. 4. http://texmin.nic.in/exports_Induction%20Note.pdf. 5. op cit, Roy, Tamal; Sur, Debanjan (2003). 6. Textile Trends, 2007, Eastland Publications Pvt Limited; Kolkata; pp 35-37, No: 2, Vol L. 7. ibid. 8. ibid. 9. Textile Trends, 2007, Eastland Publications Pvt Limited; Kolkata; pg 61; No: 4, Vol L. 10. Textile Trends, 2008, Eastland Publications Pvt Limited; Kolkata; pg 53; No: 12, Vol L. 11. op cit, TT, 2007, pg 36, No: 2, Vol L. 12. Textile Trends, 2008, Eastland Publications Pvt Limited; Kolkata; pg 51; No: 11, Vol L. 13. Textile Trends, 2007, Eastland Publications Pvt Limited; Kolkata; pg 45; No: 7, Vol L. 14. ibid. 15. op cit, TT,2008, pg 61, No: 4, Vol L. 16. Textile Trends, 2008, Eastland Publications Pvt Limited; Kolkata; pg 51; No: 11, Vol L. Note: For detailed version of this article please refer the print version of The Indian Textile Journal February 2009 issue. Pooja Sharma, Faculty Member, The Technological Institute of Textile & Sciences, Bhiwani, Haryana. Neeraj Kaushik Faculty Member, The Technological Institute of Textile & Sciences, Bhiwani, Haryana. K N Chaterjee, Faculty Member, The Technological Institute of Textile & Sciences, Bhiwani, Haryana.

published February , 2009

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