West Bengal’s jute mill owners press panic button over cash crunch

Jute mill owners are also anxious about payment of salaries, which is due on 21-22 November


Mill owners said they had no idea how they will pay wages next week, and delaying wage payment will only make matters worse. Photo: Indranil Bhoumik/Mint
Mill owners said they had no idea how they will pay wages next week, and delaying wage payment will only make matters worse. Photo: Indranil Bhoumik/Mint

Kolkata: Jute mill owners are bracing for a massive production outage with demonetization of Rs500 and Rs1,000 notes disrupting supply of raw jute in the peak production season. Mill owners are also anxious about payment of salaries, which is due on 21-22 November. Workers are paid once every fortnight, in cash at almost every mill.

The Indian Jute Mills Association, or Ijma—a lobby group—has already written to the government of West Bengal seeking intervention. It is estimated that all jute mills combined pay around Rs250 crore a month in wages.

Mill owners said they had no idea how they will pay wages next week, and delaying wage payment will only make matters worse.

“The industry is shaken,” said a key textile ministry official, who did not wish to be identified.

Several mill owners and raw jute suppliers were already under the Income Tax (I-T) department’s scanner when the prime minister announced demonetization.

Combined with the “I-T department’s scrutiny and raids”, the 8 November announcement was a “killer blow” for the jute industry, which refuses to transact in anything other than cash, the official added.

For over a year, the Union government has been pressuring mill owners to start paying wages through bank transfer of funds, according to the government official. But only five mills have consented; the rest continue to pay wages in cash. Many fear they might have to halt production soon.

Because the industry employs a lot of temporary workers, it was difficult to switch to bank transfer of funds, mill owners said, asking not to be named.

Workers expect the state government to make sure that they are paid their wages on time and in legitimate currency notes, said Ganesh Sarkar, general secretary of National Union of Jute Workers. “If other states such as Assam could make arrangements to ensure there is no disruption in payment of wages, why shouldn’t the West Bengal government do the same thing for jute workers?” he asked.

Though most mills have not had to scale back production yet, they are concerned that their stock of raw jute is thinning. Farmers and raw jute suppliers only transact in cash, and supply of raw jute has temporarily stopped. Even if there isn’t any immediate production outage, mills will run out of raw jute by the end of November and will be forced to halt production from December, according to the government official cited above.

That, in turn, may have long-term implications for the jute industry: the fibre is already under pressure from plastic bags and may end up yielding more ground by the time this mess is cleared, said jute mill owners.

Not just jute, the entire farm sector might take a hit at a time when the kharif crop is arriving in the market, say a section of economists.

Fifty days is a long time, said Dipankar Dasgupta, former professor of economics at Kolkata’s Indian Statistical Institute.

Farmers will be eventually forced to sell cheap even if they hold out for a while, according to Dasgupta.

“The farm sector works on daily transactions. Demonetization will impact farmers, and I wonder how the government will live up to its promise of long-term growth if the farm sector is hit,” he added.

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