Sources in the jute industry said that a number of buyers have expressed concerns over the status and credibility of the jute mill owners and this has affected the trade in large.

"At present, there are hardly any credible jute mill owners, except a couple of mills belonging to the Birlas. Apart from them, the others neither have a spotless past nor they are well known industrialists. In such a scenario, it is risky to enter into a futures agreement with these jute mill owners," an industry source said.

President of the exchange Arun Kumar Seth told The Financial Express that the directors are aware of this problem and steps were taken to win the faith the buyers.

"We are aware of this problem. The exchange must safeguard the interests of the buyersin the same fashion as it does for the sellers. We have decided to bring some minor changes in the bye-laws of the exchange. The matter has been forwarded to a special committee of the exchange for a proposal," Seth said.

Seth also said that the exchange has written letters to the jute mill owners, asking them to disclose their statutory dues.

"We have asked the jute mill owners to disclose their provident fund, ESI and sales tax dues. If a mill is found to have a heavy burden of it, then its membership may be deleted from the exchange," the president said.

It may be noted that in the last two months, the regional provident fund commissioner attached the godown along with the finished goods of four mills. This has raised apprehensions among the buyers.

However Seth ruled out the chances of rating the jute mills against their financial status. "We cannot do it because their are some financially sound mills with an odd habit of defaulting and in contrast to it, there are some mills which are eager tomeet their commitments despite their financial weaknesses," he said.

As per the existing bye-laws of the exchange, in case of a default at the end of the delivery either the buyer or the seller and in some cases both of them are penalised.

However in the present circumstances the laws have some loopholes. The hessian exchange has a three month transaction period. It has been found that within this time, mills do change hands and the new mill owner, at times, does not honour the agreement of his predecessor.

Although the "pucca delivery order" (or PDO as commonly said in the jute circles) is fully secured by law, still the exchange wants to bring in more security in the transactions. Incidentally, a PDO is a note of commitment of a seller to buyer.

"If a buyer has a valid PDO and is willing to buy the goods at the end of the hedge period, then the seller is bound to deliver the goods. If he fails then he will have to pay a penalty. In spite of this security, we are thinking of the changes touplift the image of the exchange and attract from players," Seth said.

The East India Jute & Hessian Exchange is the only commodity exchange in the eastern India. Futures trading in jute sackings has been recently re-introduced in this exchange.