The Financial Express

The sad saga of state owned jute mills

| Updated: July 07, 2020 21:12:00

The sad saga of state owned jute mills

Shutting down the state-run jute mills with more than 25,000 workers rendered jobless is no doubt a bolt from the blue at a time when livelihoods of millions across the country are up for grabs due to the ongoing pandemic.

Last week, the government formally announced that it would stop operating the state-owned jute mills under the Bangladesh Jute Mills Corporation (BJMC) and its 25,000-plus workers would leave their workplaces with 'golden handshake'.

Jute and textile minister in an online press conference said the government was going to shut down the country's 22 public jute mills due to huge amounts of recurring losses year after year. He added that the mills would reopen under a public-private partnership (PPP) arrangement within the next six months.

Clear enough, it was not a sudden decision. Quarters close to the government told the media that it was so decided around six months back. Observers hold that the timing was wrong, and the expectation that the mills would soon be in operation under PPP does not inspire much hope. The government in the past tried in vain to run some of the mills under PPP, and so going for PPP for all the mills in time of the pandemic is thoroughly impractical. The jute and textile minister in his statement also said that once the mills are reopened under the new model, demand for workers would grow three-fold and skilled workers now being laid off would get the opportunity of getting reemployed. It is not understood what makes him so optimistic given that PPP scheme, recognised in many parts of the world as a viable mechanism to run industrial projects, has failed to attract any attention from investors in the country, so far. 

It is interesting to see that although the country's jute sector has been languishing in losses for decades, it hardly ever ceased to stir hope, at times rather extravagantly. One may recall that around a year ago, there was much hype about the high prospect of jute even under the management of the state agency BJMC when jute was hailed as the next growth driver of the economy. The unfortunate thing is that the authorities including public representatives often tend to rely on people's forgetfulness while repeating lofty hopes and hollow promises. It now remains to be seen what follows in the months ahead.

It is commonly believed that mismanagement, corruption, lack of product development and planned marketing ruined the jute mills -- beyond repair. The blame is thus placed squarely on the BJMC.  Reports say that in the last 10 years, the BJMC could do little to improve the industry despite taking staggering amounts  from public funds. A local daily reports that in 2009, the government allocated Tk 52.41 billion to BJMC to revamp the sick industry to be able to run the mills self-sufficiently.  However, within six years, the BJMC asked for Tk 7.0 billion to purchase raw materials, and in 2018, it asked for another Tk 10.0 billion to pay workers' wages and other financial benefits. 

While nationalisation of jute mills immediately after liberation of the country with no clear roadmap caused havoc to the world's largest jute industry, subsequent privatisation did not help repair the damage. More importantly, the private hands which gained control over the mills were in many instances not eager to explore the potential. As a result, at a time when global demand driven by consumer preference for the natural fibre is more pronounced than ever, our jute industry has remained content with export of mostly raw jute, yarns and twines and sacks. In the domestic market too, jute as a manufactured product has not been able to cause any mentionable impact because of little or no investment in research and development (R&D) to produce diversified products.

The country's jute sector has been facing many problems -- some indeed highly challenging. Default bank loans, mounting stockpiles, export slump have been causing serious difficulties for the entire industry. It has been reported that total bank loans availed by the jute sector stand at around Tk 15.0 billion, a good portion of which has now become default. Stockpiles have hit a nine-year high. Downturn in exports by nearly 20 per cent in the last fiscal owing to declining overseas demand from major markets has left things more uncertain than in the recent past. Depressed international market and domestic demands have forced more than a dozen mills to shut down in the past few years, and those that are in operation have drastically reduced production.

The problems with the jute sector are often seen as a mix of maladies relating to productivity, product development and marketing. There was hardly any systematic plan for continuous research to develop and diversify jute products in keeping with consumer tastes and preferences at home and abroad. Stray initiatives were there, but lack of concerted efforts coupled with fund constraints did not allow these to materialise in a commercially viable manner.

Critics tend to view the decision of the government more as a relief to break free of the shackles of financial burden than as something fruitful to come by. It is not known what plans are there up the policymakers' sleeves to make a miracle happen.


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