Raw Jute Prices Plunge 50% in Bengal in Three Weeks, Rattling Mills and Farmers

According to price bulletins issued by the Jute Balers' Association (JBA), the benchmark rate for TD-5 grade raw jute (South Bengal) dropped from ₹18,300 per quintal on July 9 to ₹9,100 by August 1 — a fall of more than ₹9,000 in roughly three weeks.

What makes the scale of the decline especially striking, according to industry observers, is its timing: the crash preceded the full arrival of new-crop jute at mandis, meaning the supply-side pressure typically associated with harvest-season price falls cannot fully explain the movement.

Industry veteran and former Indian Jute Mills Association (IJMA) chairman Sanjay Kajaria described it as "an extraordinary crash," calling for a transaction-based investigation into how prices moved so sharply before adequate new-crop volumes entered the market.

In a formal letter to JBA chairman Madan Gopal Maheshwari dated July 14, IJMA alleged that the daily quotations published by the JBA were "not reflective of the actual price in market trades." Mills, the association said, were being compelled to pay prices higher than the published rates for ready-delivery contracts — and even then, actual deliveries were frequently falling short.

The charge goes beyond a bookkeeping disagreement. IJMA pointed out that JBA quotations serve as the primary reference for the jute commissioner's office when computing the raw jute cost component in the monthly fair-price formula for government jute gunny bags. Since raw jute accounts for nearly two-thirds of total manufacturing cost, any systematic distortion in quoted rates directly undermines the credibility and accuracy of that price-fixation mechanism — with consequences for both mills and the government's packaging procurement budget.

Responding on July 16, JBA chairman Maheshwari defended the association's price-setting process, explaining that a five-member quotations committee records rates submitted by participating mills on each working day. The committee evaluates these on a "like-for-like basis," applying a standardised ready-delivery window of seven to ten days.

Quotations that involve non-standard delivery timelines or atypical payment terms are excluded from the final benchmark to maintain comparability, Maheshwari said. He added that the methodology has been "consistently followed" over the years and that the published quotation is designed to offer "a fair, objective and consistent indication of the prevailing market for comparable ready-delivery transactions."

However, IJMA's objection — that mills are routinely transacting above the published rate — suggests the committee may not be capturing the full range of real-market bids, a gap the industry is now pressing to have independently examined.

The controversy carries significant policy weight because government jute gunny bags — used for packaging foodgrains under mandatory jute-packaging norms — are priced monthly by the jute commissioner's office using JBA quotations as a core input.

Raw jute constitutes nearly two-thirds of total manufacturing cost, meaning even moderate distortions in quoted benchmarks translate into material mispricing of government contracts. If quotations persistently lag real transaction prices, mills face a cost squeeze; if they overshoot, the government overpays.

The current episode — a near-halving of the benchmark in three weeks, disputed by mills on the ground — highlights structural questions about whether a committee-based, self-reported quotation system is robust enough to serve as the backbone of a government price-fixation mechanism. Industry voices, including Kajaria, are now calling for a transaction-data-driven review before the pricing anomaly is baked further into the system.