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Calcutta 1981

Jean Racine

Session III. A. Tackling the Crisis

Addendum J. Tea, Jute and Industries

Three Appraisals of Calcutta's Economic Problems

The Statesman

Texte intégral

1When it was an imperial city, Calcutta owned her prosperity largely to two commodities, tea and jute, which found a world market. Tea leaves treated on the plantations of Darjeeling and Assam were brought to Calcutta for export, sustaining a brisk trade. Jute, grown in the Bengal delta by thousands of small farmers was transformed into gunny bags and other products in dozens of jute mills scattered along the Hoogly river, north of Calcutta. With the development of the coal mines and the Steel plants around the Bihar-Bengal border, the metal-based engineering and Chemical industries came to the forefront and contributed to the industrial strength of the Calcutta metropolis.

2Today, in the years of crisis, what are the problems faced by tea and jute? What are the main reasons for the decline of West Bengal's industry?

3Two editorials from The Statesman answer the first question. Amiya Gooptu, a leading Bengali industrialist and a former Sheriff of Calcutta, answers the second one, and shows how various quarters in Bengal and in New Delhi are responsible for the present industrial set-back

  • 1 For further information, three recent studies deserve to be mentioned:
    On the problems of tea: "Tea (...)

41. These three documents are presented here by courtesy of The Statesman in which they were first published on 20 November 1981,27 April 1982 and 3 November 1980 respectively.

Cup full of problems

The Statesman, Editorial, 20 November 1981

5Perhaps the most important reasons for the current emphasis on tea exports is to obtain favourable terms for India when quotas are allotted under the international agreement which is now being negotiated. If it materializes, the accord will be of great help to tea producing countries which are now facing glut conditions in the world market. The talks have dragged on for a long time; that some progress appears to have ultimately been made is the result of a less rigid stand by African producers like Kenya who have reaped handsome profits, especially in London, at the expense of India, Sri Lanka and other established exporters. It is, however, unfortunate that the Indian sales drive has to be made at a time when domestic production shows every sign of declining. Production fell by 14.78 million kg. between April and September, exports rising by about 22 million kg. compared to the corresponding period last year.

6More important perhaps is the observed relationship between a rise in output and an increase in domestic consumption, which does not augur well for the domestic consumer in the months to come if present production and export trends persist.

7The tea output rose by 68 million kg. between 1951 and 1961, by 81 million kg. in the next 10 years, and by 140 million between 1971 and 1980. Domestic consumption increased by 67 million kg., 85 million kg. and 120 million kg. respectively during the same period. It is apparent that should exports exceed last year's level of 230 million kg. shortage on the domestic market may lead to higher prices. Calcutta auction rates are still slightly depressed. One of the reasons for which may be the West Bengal cess on ex-garden direct sales which has resulted in a larger flow to auction centres. But it remains to be seen how long this phase will last —there are already signs of recovery— especially in view of the emerging tightness in domestic supplies.

8The longer term promises more serious problems if measures are not soon taken to reverse the declining trend in output. It is revealing that three months elapsed after the "national conference" on the industry's problems and prospects held in New Delhi in August, before a decision was taken to constitute a group to suggest follow-up action. The industry feels that if profitability does not improve, "immediately” and if production costs are not reduced by, say, a lowering of fertilizer prices, production may fall even further next year. There would, therefore, be hardly any possibility of achieving the 600 million kg. output target by the end of the Sixth Plan. Clearly, efforts to improve the efficiency of big and small tea gardens (some managements leave a lot to be desired) and reduce production costs with official assistance which appears essential deserve priority over demand for more export relief and abolition of State taxes.

Jute in crisis

The Statesman, Editorial, 27 April 1982

9That some jute growers in West Bengal have switched over the paddy cultivation this season indicates the seriousness of the economic difficulties they are facing because of low raw jute prices. The recent rise in the prices of rice is of course an inducement for the switch, but the poor returns from traditional cultivation are perhaps the main reason for the shrinkage in the area under jute. It is too early to say what the effects will be on the jute industry in the Corning year. The exact extent of the jute land involved is not yet known. The impact of the change in raw jute supply will depend on factors such as export demand and the state of the domestic market in 1982-83.

10As a spokesman of the State Agriculture Department has pointed out, the shift will probably result in higher earnings for the farmer; it might also help control the rising price of rice if the harvest from the additional acreage is substantial. The fact, however, remains that the jute economy must be adversely affected by a reduction in its output base.

11Both the West Bengal Government and the Jute Corporation of India will have to try to reclaim the lost land for the fibre and perhaps to make jute cultivation sufficiently attractive to farmers once again. Unfortunately none of the schemes devised so far to protect the jute grower's earnings has yielded results. Extensive procurement operations by the Jute Corporation is one way in which the grower's interests can be protected but the task appears to be too big for the Corporation alone to handle. Indeed, there is an element of desperation in Mr. Jyoti Basu’s plea to the Centre to nationalize the entire industry. The suggestion might make sense to the extent that such a step would help control the rapacious middlemen in the raw jute trade. But as past experience shows there is no certainty that a change in ownership will readily induce an increase in productivity in the 60 odd jute mills.

12The industry has been arguing that factors "beyond its control" led to an operating loss of about Rs. 120 crore last year and that the situation this year is equally bleak. In particular, it has been stated that while off take of jute goods has been low during the past 18 months, the price of products such as carpet backing, sacking and hessian has been consistently below the cost of production. This is largely true, but the present situation is also a result of past indifference on the part of mill-owners to the need for modernizing equipment and increasing productivity. Too much perhaps is being made of the fall in export demand due mainly to the slump in construction activity in the American market No doubt sales, mostly of carpet-backing, have been affected, but failure to develop new uses of the fibre has also contributed to a sluggish market Erratic supply has been identified as another factor which has irked importers. The proposed indefinite strike by jute workers, scheduled to begin on June 14, can only make matters worse.

The decline and fall of West Bengal's industry

Amiya Gooptu2

  • 2 Amiya Gooptu's analysis has been published in The Statesman on 3 November 1980. Two brief cuts hav (...)

13Have we suddenly woken up to the reality of West Bengal's steady decline as an industrial state?

14The "General Survey of Industries: 1977-78" recently released by the Central Statistical Organization reveals that West Bengal has slipped to third place among India's industrialized States after Maharashtra and Gujarat... It is only a question of time before West Bengal stumbles still lower in industrial ranking. The State's annual growth rate has hovered round a pathetic one per cent over the last 30 years. With an industrial labour force which is 20 per cent more than that of West Bengal, Maharashtra, produced 110 per cent more goods. The per capita income of West Bengal has, over the last three decades, slipped from the first position to a lamentable sixth. Yet only 20 years back, West Bengal was India's most industrialized state accounting for a third of the country's power output. Today West Bengal's share of national power utilization is below 8 per cent...

15What has made Gujarat tick? In short the business acumen of Gujaratis backed by determination, hard work, intense lobbying with the Centre has brought about what amounts to an industrial revolution in their part of the country. When Gujarat was born in 1960 as a separate State, there was hardly any industry within its territory apart, of course, from the traditional cotton textiles. Today, industries producing heavy Chemicals, ceramics, petrochemicals, cement, synthetic fibres, pharmaceuticals, electronics and engineering products are developing very rapidly. Small-scale industries are also mushrooming all over the State. Could all this progress have been possible without the conscious and deliberate support extended to the State by the country's ruling class?

16Reverting to West Bengal, recovery from a seemingly irretrievable position will require the utmost determination on the part of everybody to defeat the challenge of forces that appear almost invincible. Economic progress is not entirely a matter of physical resources and their mobilization; the paramount requirement is a will to advance towards desired goals. It is held that economic issues like price control or rapid growth cannot be handled without necessary political will at the top. And the "top" in the India context means New Delhi. Similarly, with a sagging will, no amount of measures will help this State to win its place back in the national economic league. Politician factors have gone against West Bengal's interest since Independence. That West Bengal’s economic regress coincides with the country's planning era may not be entirely coincidental. Central planning, as practised in India, relies on politics for deciding the economic course. West Bengal maintained its national lead in the economic sphere in 1947. Then something went wrong.

17The crucial issue is the industrial licensing which authorizes investment with sanction for size, capacity, location, importation, allocation of scarce material and allotment of officially-controlled credit. Official clearance is also relevant to the movement of goods within the country and transport in course of international trade. By specifying the port of entry and exit, the Central government is able to regulate traffic so as to control the tonnage handled at any port. It is not surprising that Calcutta port has been reduced from once the country’s largest port to its present insignificant position. It is not only laissez faire enterprise, but even government initiative at various levels which suffers from the whims of licensing control.

18The West Bengal Chief Minister recently declared that the Centre's delay in sanctioning projects under various pretexts, even when they are endorsed by international experts, was the root cause of West Bengal's industrial stagnation. The reconstruction of the India Paper Pulp Company, setting up ship-building and ship-repairing yards and a Steel plant at Haldia, an electronic complex and truck manufacturing unit in Durgapur—all have failed to attract the Centre's attention. Nowhere has the Centre’s apathy been more pronounced than in the delay in clearing the Rs. 430 cr ore Haldia petrochemical complex.

19Against 353 letters of intent and 294 industrial licenses issued to Maharashtra in the three years ended December 1978, West Bengal's figures were only 110 and 119 respectively, working out at below 8 per cent of the all India total. As further disability, bank credit sanctioned to West Bengal was only Rs. 1,600 crore in 1978-79 against Rs. 3,500 crore drawn by Maharashtra.

20In the matter of development, selection is essential regarding industrial sectors to be adopted to adequately power the State's industrial drive. Indiscriminate pursuit of industrialization will not sustain recovery with a momentum essential for further growth. Expenditure of energy on technically obsolescent, outdated or physically depreciated equipment will be a sheer waste or resources. Mr. K.K. Birla deplores low productivity as a cause of West Bengal's industrial stalemate; it is easy to overlook the fact that productivity is as much an indicator of managerial neglect and corruption as also of an abundance of industrial equipment long past their useful fife.

Notes de fin

1 For further information, three recent studies deserve to be mentioned:
On the problems of tea: "Tea Marketing: Change Needed," Special Report in Capital, 19 April 1982. This report reflects the point of view of the large Companies.
On the problems of jute: Swapan Kumar Sen: "Crisis and Profitability in Jute Industry” in Economic and Political Weekly, 26 February 1983. Sen shows how, under the cover of the so-called jute crisis, the jute industrialists have substantially increased their profitability.
On the industrial decline of West Bengal: one of the most precise analyses is Debdas Banerjee's study, "Industrial Stagnation in Eastern India. A Statistical Investigation," Economic and Political Weekly, 20 February 1982 (J.R.).

2 Amiya Gooptu's analysis has been published in The Statesman on 3 November 1980. Two brief cuts have been made for the present edition (J.R.).

© Institut Français de Pondichéry, 1990

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