Mill owners are already earning a high profit due to the surge in the price of the end products. A forced lowering of raw jute price will help the owners to bolster their current margin. Significantly, the new order also prohibits transactions beyond a specific limit without the permission from the jute commissioner in writing.
This may affect the flow of trade in the spot market. At the same time, this can prevent stock piling and other such practices in the market, said traders.
The government order also noted that the decision to tighten controls was being done to "prevent holding of stocks or speculation on raw jute through exchange or exchanges or otherwise." Drawing a parallel with sugar futures trading, several commodity exchanges said that it could disturb price discovery through the bourses.
Kailash Gupta, MD, NMCE, said, "A notification rescinding the control orders is required, as was done in the case of food stuffs including edible oil seeds and oils earlier."
A section of the traders also pointed out that this would harm the growers, who are already suffering owing to several substitutes to jute like plastic. "A lower price means that mill owners will get an excuse to offer less to the growers, said a trader from Kolkata.
However, a jute mill official pointed out that the price cannot go below a certain level as the minimum support price (MSP) is also fixed by the government.
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