This was stated in a report prepared by UNCTAD for the East India Jute & Hessian Exchange on the use of the commodity price risk management instrument to encourage farmer's participation in raw jute hedging.P Nandakumar, former secretary of the India Pepper and Spice Trade Association, who prepared the report pointed out the inefficiency of Jute Corporation.

"As in case of any other government organisation decision making is a prolonged process and by the time decisions are taken damage would have already taken place. The time gap between the decision making always helps the private trade to take decision in its favour. Prices are also manipulated as soon as a large inventory is accumulated by the JCI thus forcing it to incur huge loss in itsoperations," the report stated.To reduce these losses Nandakumar felt that the Jute Corporation should participate in hedging operations.

"With infrastructure and trading facilities to procure 25 per cent of the total jute production in India its services can be properly utilised. The corporation can find mechanisms to reduce its loss on price fluctuations by participating in the futures market," Nandakumar stated.

The report also advised farmers cooperatives to participate in futures trading but Nandakumar apprehended that they are aware of the functions of futures market. Moreover due to lack of enforcing machinery, in case of adverse price movement forward contract deliveries are often defaulted.They are also made to feel that any price above the minimum support price fixed by the government is a profit for the trader and need not to be passed on to them.

"These kind of misguidance is mainly due to the poor literacy rate among farmers aided by the government's inefficiency to educate them on thesignificance of MSP," Nandakumar felt.

So he advises: "The existence and functions of different types of forward and futures contract have to be brought to the notice of the farmers organisations. Different types of contracts make it more confusing and hence it is recommended to have futures contract rather than forward contracts which can be enforced."

Jute Corporation has also been advised to participate in futures trading on behalf of the small raw jute growers and their cooperatives as it can absorb the shocks of price fluctuations.

"One of the major reasons preventing the farmers organisations for providing price guarantee is the high fluctuations that take place in the trade. At present, no farmers' organisations other than NAFED is the member of the exchange. Even JCI is not the member. Moreover it will not be feasible for small farmers organsiations spread out in the villages to participate in the futures market. The only alternative is the central agency of the societies of JCI to undertake theresponsibility of participating in the futures market," Nandakumar stated.