The production of jute in Nepal has been steadily declining over the years, forcing domestic jute mills to rely on raw materials imported from India and Bangladesh.

Four decades ago, the government used to offer subsidies for fertilisers, seeds, and for digging ponds to jute farmers, fostering growth in the sector. However, the subsidies were gradually reduced two decades ago, which many believe has contributed to the steady drop in domestic production of jute.

Following the decline in domestic jute production, industries reliant on it have been sourcing raw jute from India and Bangladesh. Several industries have even shut down.

According to stakeholders in the jute industry, if the government reinstates subsidies for jute cultivation and revives closed factories, Nepal’s annual trade deficit with India could be reduced by as much as Rs 15 billion.

Five jute industries in the Sunsari-Morang Industrial Corridor currently rely on imports, while six others have ceased operations altogether. The decline in domestic production has resulted in an annual import of raw jute worth Rs 4 billion.

Ramesh Rathi, vice president of the Jute Industry Association, noted the adverse impact of the decline in domestic production. He recalled how, just three decades ago, jute from Jhapa, Morang, and Sunsari was regarded as one of the best in the world and exported to Europe. However, with local supply dwindling and reliance on imports growing, 80% of the jute now used by domestic industries is sourced from India and Bangladesh.

Rathi stressed the urgent need for government intervention to revive the jute industry. He said that they have consistently urged the government to make jute sacks mandatory for food packaging while offering concessions to farmers to help them achieve self-sufficiency in jute. He added, "We requested the Ministry of Agriculture to establish a board to restore jute production to its previous levels, but there has been no progress."

Jute farming in districts like Jhapa, Morang, and Sunsari, which spanned 10,513 hectares 14 years ago, has now dwindled to 7,220 hectares in the fiscal year (FY) 2023-24, following the cessation of subsidies for fertilizers, seeds, and ponds.

Annual jute production, which was 12,959 metric tons 14 years ago, has now decreased to 10,205 metric tons in FY 2023-24, according to Sujan Karki, a technical officer with the Jute Research Program in Itahari.

Industries in Sunsari and Morang currently require 80,000 metric tons of raw jute annually, which is being imported from India and Bangladesh.

Farmers are unable to cover the costs of domestically produced raw jute because the government has not set a minimum support price. As a result, Nepali jute is often sold at the lowest possible price when it reaches the market.

Kamal Karki, a farmer from Gauriganj, Jhapa, says that without a 25 percent profit, farmers cannot even consider continuing jute farming. On one hand, farmers are disappointed due to the low price of jute, and on the other, the jute industry is facing difficulties. Importing jute from India and Bangladesh and competing with their products while selling finished goods has become highly challenging. This is the reason for the closure of jute industries in Sunsari and Morang.

Govinda Bajgain, Chief Executive Director of Arihant Multi Fibers Ltd, says that the jute industry has begun to shut down due to reliance on imports and the need to compete with industries in those countries that supply raw materials. He mentioned that since the government has not introduced any program to link agriculture and industry, both industrialists and farmers have become victims.

Technical officer Karki says that if the government provides subsidies for fertilizers, seeds, and pond digging as it did before, jute farming can return to its previous levels.

Jute produced from 7,220 hectares of land is currently supplying 20 percent of the raw material for the domestic industry. He said that dependency on imports will be reduced if the country can cultivate jute on 56,000 hectares.

The Jute Crop Research Center in Itahari produces 2,600 kg of seeds annually, which is insufficient for Nepalese farmers, who need around 40 to 45 tons of jute seeds. Jute is cultivated in Morang, Jhapa, Sunsari, Saptari, Siraha, and Kailali in the west. In Kailali, jute farming covers 50 bighas of land.

Vice President Rathi said that if the government mandates the use of jute sacks in food packaging, like in India, and utilises jute for road construction and landslide control, as in Bangladesh, it would significantly reduce the industry's problems here.

According to him, if the government offers export tax exemptions for readymade jute products, as India and Bangladesh do, the closed jute mills could reopen, creating new employment opportunities.

Rathi also noted that India’s 4 percent anti-dumping duty on imported finished jute products prevents Nepali industries from competing with jute products from India and Bangladesh.