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Private jute millers cash-strapped

Porimol Palma
The government's slow pace in funding the jute sector is frustrating private mills, which suffered huge losses due to global recession, and are now facing a shortage of working capital when demands are rising.
“Peak season for jute is getting over,, but the government appears to be sluggish in responding to our proposal to restructure our loans and increase cash credit limits,” said Bangladesh Jute Mills Association (BJMA) Chairman Najmul Huq.
“If we fail to buy quality jute now, we won't be able to recover losses even if demands go up,” he said, adding that July-September is the peak season. The average price of raw jute is nowTk 1,000 per maund (37.3 kilogramme), but it will go much higher by late September. Buying jute then at higher prices will lead to loss of business competitiveness, he said.
Bangladesh earned $318.34 million in fiscal year 2007-08 and $283.29 million in 2008-09 from export of jute products.
The private mills under BJMA and Bangladesh Jute Spinners Association (BJSA) contribute around 70 percent of the earnings, while the public mills
under Bangladesh Jute Mills Corporation (BJMC) add the rest.
The industry, however, faced huge losses following decrease in demand and prices due to global economic crisis. According to the BJMA, the demand for jute products came down by 30 percent, while prices by around 40 percent since October last year.
“But, the demand for jute products has been on the rise from March this year. The prices are also on an upward curve, though not up to an optimum level,” Najmul Huq said. "However most of the jute mills are suffering from a shortage of working capital.”
Against this backdrop, BJMA and BJSA at a meeting on July 5 appealed to the jute ministry to help restructure the loan of the fund-crunched jute mills, increase the cash credit limit and provide new loans.
Endorsing the demands, Jute Minister Abdul Latif Siddique wrote a letter to the finance ministry to take necessary measures. But, the private jute mills got no response, although the state-owned BJMC jute mills, which incur severe losses regularly due to inefficiency, received Tk 300 crore to buy raw jute.
Sixty percent of the private jute mills will continue to suffer losses and conse-
quently will be shut down unless the government takes immediate steps to ensure working capital for those, said BJMA Secretary Abdul Barik Khan.
A private mill owner said he got a mill with Tk 8 crore loan burden in 1982 when public jute mills were privatised, and was running it on his own.
“It needs production worth at least Tk 5 lakh everyday if I want to make the mill profitable, but the present production is worth only Tk 3 lakh," he said, requesting anonymity.
The jute mill owner said the losses could be recovered if new machines could be installed. The decades-old machinery's production capacity is 50 percent less than that of the new and modern machinery, he said.
"We are concerned. If fund is not made available, most private jute mills won't survive," said BJMA former chairman KamranT Rahman.
Every year the government is pump ing money into the state-owned BJMC jute mills, but taking no care of the private ones, he said, adding: "This has been creating problems in the jute market for around two decades."
The government must look into the matter seriously and act immediately to develop the jute industry, Rahman said.
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