Rejuvenation of Jute Industry: Role and Potential of Diversified Products

Moulik T K, P. R. Shukla and Jayanth Varma

IIMA Working Papers from Indian Institute of Management Ahmedabad, Research and Publication Department

Abstract: For more than a century, jute industry occupied a very important position in the national economy of India. However in late 70’s a serious jute imbroglio started and large number of ills have closed down or are running at losses, the demand-supply gap, raw jute price fluctuations, synthetic substitutes and reliance on government sheltered demand contributed considerably to the present serious problems facing the jute industry. While the decreasing trend in demand of traditional jute products is inevitable, the emergence of non-traditional diversified jute products offer possibilities, to an extent, for rejuvenation of jute industry. This paper considers the role and potential of diversified products for rejuvenation of jute industry. A most important feature of diversified jute products as opposed to traditional products is the large number of item variety and customer segments. The production, marketing and cost structure of diversified products is entirely different compared to traditional products. The production is characterised by small lots, marketing by innovation and quick response to changing customer demand and cost structure include considerably high value addition over raw jute in comparison with traditional products. These characteristics of diversified products require the jute mill project structure to be highly flexible and dynamic. It is analysed and argued that a five tons-per-day (tpd) jute mill project integrated with small handloom, handicraft or cottage industry consuming yarn and fabric from the mill for end-product conversion is financially viable and operationally suitable. Extensive scenario analysis suggests that the project is highly sensitive to large changes in some crucial variables such as wage rate, raw jute prices, capacity utilisation and selling price. Thus, while the unit is financially viable, it is not in such a rosy business to be profitable under unimaginative and inefficient management. It is concluded that though a small 5 tpd diversified jute mill project is financially viable, the management practices at project implementation and operations stages shall ultimately decide the success of the project.

Date: 1990-04-01
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