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Katihar Jute Mills' Closure Pushes Workers, Farmers to a Dead-End

Tarique Anwar |
Due to the closure of jute mills in Katihar, the demand for raw jute has witnessed a sharp decline in the past five years — forcing farmers in the Seemanchal region to reduce the land under jute cultivation and shift to other cash crops.
Katihar Jute Mills

Katihar: Once known as Bihar’s ‘jute capital’, Katihar is shedding tears at the plight of the industry now. The city in eastern Bihar has two jute mills, which had around 4,000 workers workers. But neglected by consecutive governments and elected representatives, prevalent corruption and internal politics has now left the two mills — Sunbio Manufacturing Private Limited (also known as Old Jute Mill) and Rai Bahadur Hardutroy Motilal Chamria (RBHM) Jute Mill -- in ruins.

While the RBHM Jute Mill (which was spread across 53.59 acres of land) was closed on January 8, 2016, the Old Jute Mill (occupying around 35 acres of land) seems to be breathing it's last.

Earlier run by the Bihar State Industrial Development Corporation (BSIDC), the Old Jute Mill was leased out to Sunbio Manufacturing Private Limited — a Kolkata-based firm owned by industrialist Govind Sharda — in August 2001 for Rs 4 crore after its financial position deteriorated.

The ailing mill previously had around 3,000 workers, who have now been reduced to around 200. It daily production, which was earlier hundreds of tonnes, now barely stands 10 tonnes. The machines are outdated.

Katihar Corporator Bipin Chaubey alleged that the owner of the mill is actually not interested in running the factory. “He acquired the mill just to grab the vast area of land the mill has in its possession,” he told NewsClick.


Established in 1935, the RBHM, then a private mill, was first shut down in 1977. At that time, it had around 10,000 workers. After the Janata Party was voted to power in 1977 and late Morarji Desai became the prime minister, veteran socialist leader and then Katihar MP Yuvraj Singh had staged a 37-day hunger strike against his own government — demanding revival of the mill.

Accepting the demand, the Centre acquired the mill — which resumed operations on August 18, 1978. A public sector undertaking, National Jute Manufacturers Corporation (NJMC), was later incorporated in 1980 to control six mills — five in West Bengal and one at Katihar in Bihar.

Following its acquisition, RBHM continued production for the next 26 years. It was closed once again on March 23, 2004 and all workers were relieved under Voluntary Retirement Scheme (VRS) in three phases from 2007 to 2011.

In 2010, when the Manmohan Singh-led United Progressive Alliance (UPA) government took over, the NJMC was given a financial package for the revival of three mills — RBHM in Katihar and Kinnison and Khardah jute mills in West Bengal. This time again, said sources in the NJMC, former MP Yuvraj Singh had an important role. Then Union Railway Minister Lalu Prasad Yadav, the sources said, had also taken an active interest in the deliberations of Appellate Authority for Industrial and Financial Reconstruction ( AAIFR) and Board for Reconstruction of Public Sector Enterprises (BRPSE) for revival of the Katihar unit.

Also Read: Shut Down Over 3 Years Ago, Bihar's Jute Mill Slowly Turning to Ruins

“To enhance production and cost effectiveness, there should have been upgradation of its equipment in phases and need-based repair and renovation of machines. Poor production size as a result of the old and outdated machines and high expenditure of operations worsened the financial health of the mill. Machines have a limit of maximum production. It needs advancements to increase the production capacity. A minuscule amount of the funds allocated for procuring and technologically advancing the plant was spent and that too on beautification of the factory building. Major portion of the funds went into the pockets of NJMC officers,” alleged Girish Kumar Singh, general secretary, Jute Mill Mazdoor Sabha, while talking to NewsClick.

The three mills were re-started under the Public Private Partnership (PPP) model but could not begin operations for over the next two years. The NJMC hired a labour contractor — Rahul Enterprises — and made RBHM operational from January 1, 2014.

This time, the production size improved even with limited human resources. “But it did not go down well with NJMC officers as the increased production with lesser manpower could have exposed their corruption. They had higher number of workers, but the production size was not good. They played a trick to bring down the production. They stopped buying good quality jute supplied by the Jute Corporation of India (JCI). Low quality jute began to be purchased from private sellers and supplied to the mill. This trick worked and affected the production, causing loss to the factory. I lodged a complaint in this regard with Mr A Madhukar Reddy, joint secretary with the Ministry of Textiles, but no action was taken,” said Singh, who was also a worker in the factory.

Demanding that a Central Bureau of Investigation (CBI) probe be constituted against the officers, so that truth will come out, he said, “I am not making this allegation just out of the air. NJMC Director (Finance) YK Garg was arrested by the CBI red-handed while taking bribe.”

After the perennially loss-making NJMC was shut following the October 2016 recommendation by the Niti Aayog, a policy think tank that replaced the Planning Commission by the Narendra Modi government, all its six jute mills, including the Katihar unit, was permanently closed.

With its net worth becoming negative due to huge accumulated losses, the NJMC had become a sick PSU and was referred to the Board for Industrial and Financial Reconstruction (BIFR) in 1992 and since then it was under reference.

“Taking into account the capacity of private jute mills, market conditions and the PSU’s previous performance and competition from plastics, it was noted that the NJMC would not be in a position to recover its negative net worth through operational profits. Therefore, it was decided to be closed down,” said an official associated with the Textile Ministry.

He said NJMC’s accumulated loss during that time was Rs 3,500 crore and the outstanding dues by way of government loans and other financial support was Rs 6,000 crore. As a result, he said, the quality of jute sacks turned inferior and production also once again dipped. This resulted in the closure of the mill on January 8, 2016, he added.

At least two former officers who have worked with the NITI Aayog told NewsClick that the productivity was so poor that in the mill, around 120 workers were engaged in manufacturing only one tonne jute product, which hardly require 40 workers to produce same quantity.

At the time of nationalisation, the NJMC mills produced around 1.10 lakh tonnes of jute goods every year and this figure rose to 1.33 lakh ton annually around three decades ago. However, there has been a continuous decline in production thereafter.

Chaubey, an ex-employee of the mill who is also president of the Hind Mazdoor Sabha, alleged the Katihar jute mill suffered also because of regional bias. “The NJMC gave the RBHM Mill a 'step motherly' treatment. It was headquartered in Kolkata. And therefore, the budgetary allocation of the five jute mill under its control was much higher than the RBHM. The mill was clearly discriminated based on region,” he alleged.

Samrendra Kunal, an activist who is spearheading a campaign for re-opening of the mill, said neither the Nitish government, nor the Modi government has ever taken any interest in the revival of the Katihar jute mill. "Whatever decisions were taken to make the industry financially healthy,only previous governments (both in the Centre and the state) deserve credit," he added.

“The Prime Minister heads the Niti Ayog, which had recommended to close down the NJMC. Instead of coming out with other viable solutions to make the mill profitable, it was shut down, throwing thousands of people who were dependent on the mill to the mercy of God. Therefore, Modi is responsible directly for closure of the RBHM. It is needless to talk about Nitish Kumar. What did his government do in the past 15 years for the revival of sugar factories, paper mill and other such industries? Nothing,” he alleged.

As a result of its closure, he said, local land grabbers have begun looting the mill’s property. “An area of around 5.51 acres of land has already been encroached upon with the help of NJMC officials. When the matter went to the court, the mill lost the case in the local Katihar court. We fear that the vast and valuable land will be grabbed one day by the land mafia,” he added.


Due to the closure of the jute mills in Katihar, the demand for raw jute has witnessed a sharp decline in the past five years — forcing farmers in the Seemanchal region (Katihar, Kishanganj, Purnia and Araria) to reduce the land under jute cultivation and shift to other cash crops.

According to an official estimate, the area under jute cultivation has reduced to 10,000 hectares against 36,500 hectares previously. Farmers in some villages that share borders with Bengal farmers produce jute. But, they,too, have no option but to sell their produce at a throw-away prices.

“When the mill was operational, local farmers used to produce jute on large scale as their main cash crop. The jute produced by the farmers was transported to the jute mill. They used to earn good profits due to the availability of local market,” said Ashok Kumar Singh, a farmer from Baghmara village in Katihar. Against at least 10 bigha (16 acres) of land when the mill was operational, he said, he now grows jute on not more than 2 bigha (3.20 acres).

After the closure of the mill, because of staying close to West Bengal, he said, the jute farmers of Barsoi, Balrampur, Pranpur and Ahmedabad used to sell their produce to the jute mills operating there. But after closure of five jute mills there, the demand there has also decreased.

Nikhil Kumar Singh, a resident of Kumaripur in Katihar, said farmers in the region are growing cash crops like maize, banana and makhana to earn profits.


While the NJMC claims that workers have already been paid their salaries and other benefits, the workers alleged that they are still awaiting for their dues to be cleared. “We have not been paid salaries for at least three months. On top of that, we have also not got gratuity and the bonus. The provident fund (PF) of our working period and the truncated contribution of the Employees State Insurance Corporation have not been deposited in the government account. There is no one to talk about. Political leaders come and go, giving hollow assurance that all these issues will be resolved and the mill will start functioning, but it does not replicate on the ground,” said a worker, who worked as a fitter.

Another worker expressed his anger with the ruling dispensation saying, “Nitish Kumar did nothing to revive industries in Bihar. His only achievements include construction and electricity supply and he was rewarded for it twice. Now, he will see what happens. We had pinned great hopes on the Modi government, which also failed us. Temple and mosque are not going to give us food, we need employment to feed our family and children."


Katihar MP Dulal Goswami, who belongs to the Janata Dal (United), which is heading the ruling alliance in the state and is an ally of the National Democratic Alliance ruling the Centre, said he has shot off letters in this regard to the Union Textile Minister Smriti Irani and Chief Minister Nitish Kumar, apart from concerned officials such as the Commissioner of Purnia division.

“I have put forward the demand that the jute mill in Katihar be opened to ease the life of workers and farmers in the region. I have also explained to them that it would help check migration and how it will help migrant labourers,” he said.

On being asked about the government's negligence to re-open the mills, he denied, saying, “The government is taking various steps for growth of jute industry in the state and across the country. For instance, compulsory packaging of certain percentage of food grains and sugar in jute is mandated under Jute Packaging Material (Compulsory use in packaging commodities), 1987. In addition, Minimum Support Price (MSP) for raw jute and mesta is fixed every year to encourage farmers to grow more jute.”

With regard to the workers’ allegation of non-payment of their dues, the MP acknowledged it and said, “Yes, they have not been paid for some period since the time of closure of the mill. Their contributions to the PF and the ESI have also not been deposited with the government. We are looking into it. We are in talks with various stake holders and hope everything will be resolved and the mill will start functioning."

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