After closure of state owned jute mills, Directorate General of Food and Bangladesh Agriculture Development Corporation will buy from the private mills
The closure of factories under the Bangladesh Jute Mills Corporation (BJMC) has become a boon for private millers, as they will get orders the government used to place mainly with the state run jute corporation every year.
Among the government agencies, the Directorate General of Food and the Bangladesh Agriculture Development Corporation (BADC) used to buy the bulk amount, especially jute sacks, said BJMC sources.
Many other ministries and divisions also bought jute goods occasionally from the BJMC.
Also, this year, the food department and BADC are buying jute sacks of different sizes worth over Tk300 crore. After closure of state owned jute mills, all the goods will be bought from the private mills.
According to the food department, it used to buy around 3.5-4.5 crore jute sacks from the BJMC every year. The sacks came under two categories – 30kgs and 50kgs, and were priced at Tk54 and Tk74 respectively.
The food department used to buy sacks worth around Tk224 crore to Tk288 crore from the BJMC annually.
Sarwar Mahmud, director general of the food department, told The Business Standard, "We used to rely on both state-owned and private jute mills for buying jute sacks, but now we will have to depend exclusively on private mills.
"When buying sacks from the BJMC, we never had to worry about product quality. But private suppliers sometimes pose quality issues. Jute sacks also cost a little less when bought from the private sector, as the suppliers sell them at a competitive price."
The Bangladesh government on July 2 announced that 25 jute mills under the BJMC will shut down, and 24,886 workers will be put on early retirement.
There are currently 26 jute mills under the BJMC, but the decision regarding Monowar Jute Mills was not taken yet due to an ongoing case over the mill, Textiles and Jute Secretary Lokman Hossain Miah said on July 3.
Before the government made the announcement, the food department sent a letter to the BJMC in the last week of June, enquiring whether the corporation would be able to supply them with jute sacks they previously ordered.
In response, the BJMC told the food department that it will not be able to deliver 25 lakh sacks of the 30kg category. However, it will be able to deliver sacks of the 50kg category because those are currently in stock.
The BADC used to buy 50-60 lakh jute sacks – under the 10kg, 20kg, 40kg and 50kg categories – from the BJMC every year.
Responding to a query, BADC Divisional Head Ahmed Hassan Al Mahmood said, "We used to buy different categories of sacks from the BJMC, and their prices varied from Tk50 to Tk86. So, it is difficult to calculate the total yearly cost.
"Presently, we have no other option but to buy the jute sacks solely from private suppliers."
According to sources, if the sacks are priced the lowest at Tk50 each, the cost for 50 lakh sacks will be around Tk25 crore. So, the food department and the BADC had been jointly purchasing jute sacks worth over Tk300 crore from the BJMC every year.
Janata Jute Mills' CEO Mahmudul Haque however expressed doubt on whether the private mills will be able to handle the influx of orders triggered by the closure of state-owned jute mills.
"The orders will come pouring in, but the supply capacity of private mills must also be taken into account. The bags used by the BADC have some additional properties."
Meanwhile, Creation Private Ltd's Managing Director Rashedul Karim Munna said, "This sector must be given proper importance as an industry. Efforts should be taken to diversify the local market with different types of jute products, along with sacks."
Rashedul also serves as the president of the Bangladesh Diversified Jute Goods Producers and Exporters Association.