Bangladesh Jute Export Ban Pushes Nepali Industries into Crisis

Jute industries in the Sunsari-Morang industrial corridor of eastern Nepal have been plunged into a deep crisis following a halt in the import of raw jute from Bangladesh. Industrialists report that production has dropped by up to 60 percent in the last three months, warning that most factories face closure within two months if the situation persists.

The crisis stems from Bangladesh's imposition of a complete ban on raw jute exports to all countries starting August 23, 2024.

This move is seen as a repercussion of cooling ties with India following political changes in Bangladesh with the ouster of Sheikh Hasina. After India restricted Bangladesh's access to land ports for bilateral trade, effectively forcing Dhaka to rely on longer and more costly sea routes, Dhaka responded by restricting exports of certain goods, including raw jute.

Nepali industries have only been able to import jute based on Letters of Credit (LCs) opened before the ban. Bangladesh has refused to supply jute for LCs opened after that date.

According to Prakash Mundada, Senior Vice President of the Koshi Province chapter of CNI and operator of Baba Jute Mills, most industries are now operating at only 40 percent capacity due to the severe shortage.

"Industries currently have raw jute stocks that will last for one to two months at most," Mundada said. "With new jute to be planted only in March-April and harvested by September, there is a real risk of industries remaining shut for at least four months."

Mundada urged the Bangladeshi government to provide raw jute to Nepali industries, even through a quota system. "Our bilateral relations have always been friendly. Regardless of the policy applied to other nations, Nepali industries should be exempt from this restriction," he stated, calling for government-level intervention to resolve the issue.

The impact of Bangladesh's export controls is also being felt in India, where the prices of jute goods have skyrocketed. Citing a December 19 report in The Hindu, the price of raw jute in India has surged from INR 60,000 per ton in July to INR 110,000 per ton. This has forced Indian jute mills to cut production, resulting in an estimated 75,000 job losses.

Domestic Industry at Risk

The Nepal Jute Industries' Association states that over 12,000 workers are directly and indirectly dependent on the country's jute mills. Industrialists warn that importing raw jute from India is currently unviable.

Amit Jain, operator of Shree Pashupatinath Jute Mills, explained the financial strain: "Importing raw jute from India costs INR 137 per kg. However, sacks made from this jute sell for only INR 142 per kg, and jute strands for INR 138 per kg. At these rates, production using Indian jute is a losing proposition."

Industrialists estimate the seven jute mills in the Morang-Sunsari region will require 36,000 to 40,000 tons of raw jute by mid-September. These industries, which consume around 200 tons of jute daily, have an annual requirement of 65,000 to 70,000 tons.

Compounding the problem, jute farming is declining in both Nepal and India. Industrialists note that the younger generation is avoiding jute cultivation due to its labour-intensive nature. In contrast, maize farming is attracting farmers as it requires less labor and is purchased directly from the field by poultry feed industries. This shift has further driven up raw jute prices in India.

What the Data Shows

Data from the Department of Customs for the first six months of the current fiscal year (up to mid-January 2026) shows the average import price of raw jute from Bangladesh was Rs 117.63 per kg, compared to Rs 161.77 per kg from India.

During the same period, imports of raw jute from Bangladesh nearly halved, dropping to 6,740 tons from 13,238 tons in the corresponding period last year. All imports this fiscal year have been based on LCs opened before August 22.

VAT Hurdle Blocks 'Sliver' Alternative

Industrialists suggest that even if raw jute is unavailable, industries could stay operational by importing 'sliver' — a semi-processed jute product that is ready for spinning. However, sliver imports are subject to Value Added Tax (VAT). Since jute industries are not registered under the VAT system, they cannot get reimbursement for the VAT paid on imports, making it a significant financial burden.

Amit Jain notes that both raw jute and sliver currently attract only a 5 percent customs duty. He claims the government could immediately enable industries to operate by removing VAT on sliver imported specifically for industrial use.