The government will shortly propose an increase in the minimum support price (MSP) for jute to prevent price fluctuation. Dayanidhi Maran, minister of textiles, said, the Indian Jute Manufacturers Association has already proposed an increase by Rs 300 per quintal and that ?we support it.? ?The ministry will shortly take a call on it and after its clearance, the proposal will be put forward to the Cabinet,? Maran said.

At present, the MSP for jute is Rs 1,375 per quintal. Jute Corporation of India chairman and managing director RC Tiwari said jute prices shot up from Rs 1,400 per bale during the harvesting season in July, August, and September 2008 to Rs 2,800 in June-July 2009.

This is because of maximum supply during the time of harvest and the fact that farmers were unable to store jute for the lack of facilities. Traders stock up during harvest and after October, the market comes under their control and there is price volatility.

?To cover the risk of fluctuation in jute prices, we are conducting minimum support price operations through 171 purchase centres of Jute Corporation of India,? Maran said. Under the mini mission-III of the jute technology mission, the government is modernising and upgrading facilities at JCI purchase centres and market yards too, he added.

The government has increased MSP of jute by more than 50% in the last five years, Maran said.

The minister said though the compulsory reservation for jute packaging had helped the country environmentally and socially, it was a disincentive to the sector to modernise and adopt efficient processes.

Jute manufacturers have only focused on making jute sacks, and the fibre has not been exploited to make diversified products. There has been no increase in jute production too and of late, jute products have been facing severe competition from synthetic products, especially in value terms, Maran said.

By the year-end, the government will formulate a national fibre policy to ensure that the natural fibre sector is given a level playing field vis-a-vis the man-made fibre sector.

For the record, jute is a 17.46 lakh tonne market in India, and can go up to 23.5 lakh tonne by 2012. The sector has the potential to achieve a turnover of Rs 2,500 crore by 2012 from Rs 1,500 crore currently, and the ratio of domestic marketing to exports should ideally go up from 80:20 at present to 60:40 by 2012. For this there should be government support for international warehousing and participation of Indian jute industry in international marketing events, said Binod Kispotta, jute commissioner.

The government should try and remove tariff and non-tariff barriers in Brazil, one of India?s leading markets, he added.