Kolkata, Nov 25 (IANS): Cash crunch in the wake of demonetisation has hit raw jute farmers and jute mills alike, which may ultimately lead to closure of mills and cause hardship to workers and labourers, various stakeholders rue.

Jute farmers are at the receiving end since traders have been unable to purchase the raw produce from them due to shortage of cash after the November 8 demonetistaion of high-denomination currency. 

For mill owners, too, a crisis seems to be looming large on the horizons as raw jute stocks lying with them are depleting fast. The industry is finding it difficult to even arrange for fortnightly wage payments to around 3.5 lakh mill workers.

Jute millers are now seeking intervention by the Jute Corporation of India (JCI), similar to the one 11 years ago when the industry faced a crisis owing to a sharp drop in raw jute supply.

West Bengal accounts for about 85 per cent of the country's jute production, followed by Andhra Pradesh, Odisha, Bihar and Assam.

The Indian Jute Mills Association (IJMA) has already approached the government and the Jute Commissioner's Office to seek restoration of normalcy in raw jute supply.

"Usually, the growers accept cash for their produce sold to local traders. However, cash payments are not possible at present due to demonetisation and bank transfers will take some more time. As a result, the arrival of raw jute at various 'mokams' (local jute markets) has come down by 80-85 per cent," IJMA Chairman Raghavendra Gupta told IANS.

About 10-15 per cent of the total 40 lakh jute farmers in India accept payments through banks.

"The supplies of raw produce to jute mills has suffered. The trade over the past few days has been virtually nil. Whatever raw jute has arrived at mills is due to old contracts," he said.

According to industry sources, jute produce in the 2016-17 season (July to June) was estimated to be around 90 lakh bales. About 30 per cent of the crop has arrived in the markets till mid-November while the supply of the remaining 70 per cent has been held up due to the cash shortage.

This held-up supply may not come soon since there could be a tendency on part of the growers to hold on to stocks till normal cash supply is restored, according to millers.

"Recent income tax raids on private jute 'mokams' have already instilled fear among raw jute traders who are now shying away from supplying to mills," a miller told IANS on the condition of anonymity.

"On an average, many mills do not have raw jute stocks beyond one month of normal production capacity," Gupta said.

The end result could be a cut in production shifts, and resultant job losses for labourers.

"Raw jute stocks vary, depending on mill capacity. A small mill will suffer in terms of production and for want of raw jute. In that case, a miller will have no alternative but to cut down on production shifts," IJMA member Sushant Agarwal said.

In October 2005, the JCI had purchased about two lakh bales of raw jute commercially and made it available to eligible mills in proportion to their spindle capacity.

"It is an opportune time for the JCI to enter the market and purchase raw jute commercially to protect farmers and sell the raw jute to mills based on their existing spindles and production control orders (basically, jute bag orders from the Centre) issued by the Jute Commissioner's office," the IJMA President said.

The industry feels it could face a double whammy due to possible dilution of government orders too in the wake of non-fulfilment of prior orders.

"About 80 per cent mill workers hold bank accounts while the rest don't. Currently, these bank accounts are being registered with the jute mills. Bankers are also opening accounts of workers on the mill premises so that wages in future are given through bank transfers," Gupta added.