Calcutta, July 10: The union ministry of textiles has told the jute mills that they will get government orders for B Twill bags only if they buy the fibre from Jute Corporation of India.

The Jute Commissioner's office under the textiles ministry issued letters on July 8 to all mills, asking them to either open letters of credit or furnish bank drafts for raw jute payments before applying for government orders.The mills have been asked to give by July 11 their `unqualified undertaking to lift raw jute' from JCI on the government agency's terms and conditions.

Jute bags are to delivered by July 31.

``The terms of payment will be irrevocable letter of credit for payment at sight or bank draft or pay order covering full value of the allotted quanity of raw jute,'' according to the letter.

The price of raw jute, the letter says, will be derived from the existing market price or the minimum support price, whichever is higher. The cost of the B Twill bags will be fixed accordingly.

``The sale prices for supply of B Twill-linked raw jute will be fixed by JCI on the basis of the derivative minimum prices of jute/mesta landed at Calcutta for the current season, or published market rates, whichever is higher,'' the letter notes.

The textile ministry has kept other options open, but has said that it will follow this formula as far as possible.

The letter says: ``While computing prices for supply of B Twill bags for the month of July 97, cost of purchase of raw jute from JCI on the basis of above formula will be considered by this office as far as possible.''The clause `as far as possible' was written in after the letter was typed out.

Jute mill owners are upset over the move to make them buy from JCI, as the government is the biggest buyer of jute bags.

Sources in the Indian Jute Mills Association told The Financial Express that this is neither the right time nor the right move from the government to check the crash in jute prices.

``The raw jute prices offered by Jute Corporation are higher than that in the market. Why will we pay such high prices? It may be factored into the prices of the B Twill bags, but for that we will have to open either a letter of credit (LoC) or place a demand draft. If the mill owner does not have the money then he will fail to qualify for the order,'' the source said.It was also pointed out that this sort of arrangement was generally worked out by the government during the offloading season and not during procurement period.

``The jute year has just started and there is a huge supply of raw jute. Even the Food Corporation of India (FCI) is asking for jute bags for its foodgrains. This is not the right time for such an arrangement. During the closing months of a jute year, when JCI carries a huge inventory of raw jute, then this formula is being used to offload,'' the sources added.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.