Rising costs, falling demand hits textile industry

The textile industry of the country is facing the double blow of an increased production cost and a decreased demand for locally produced yarn.

In the national budget for the current fiscal year, the government made a 400 percent hike in the import permit application fee and fumigation charge on the import of raw materials for yarn.

Besides, the price of gas used in the industry has also been raised by 35 percent. As a result, the production cost of local fibre has gone up.

On the other hand, the demand and price of locally produced thread have fallen sharply because of the illegal open-market sale of fibre imported under the government's bonded warehouse facility.

As a result, about 1,500 textile firms in the country are at risk as they are not getting a fair price for their products and their unsold stock is piling up.

Expressing concerns over the present situation, the Bangladesh Textiles Mills Association (BTMA) has opted for a dialogue with various government functionaries.

A team of representatives from the organisation sat with Agriculture Minister Abdur Razzaque at the Secretariat on Thursday.

Prime Minister's Private Industries and Investment Adviser Salman F Rahman and representatives from the business committee also took part in the discussion.

During the dialogue, the BTMA urged the government to lower the import permit application fee and fumigation charge.

The agriculture minister assured them of taking the matter to the right place in the interest of the country's RMG sector.

BTMA President Mohammad Ali Khokon said the meeting also discussed other related issues.

"Yarn which has been brought illegally from India and other countries are being sold at much lower prices when comparted to the cost of production of thread in Bangladesh," Khokon told The Business Standard.

"Each kilogram of locally produced yarn has been sold at $2.5 since 2015; however, the cost of production has increased manifold in this time. On the other hand, yarn brought into the country abusing bonded warehouse facility is being sold at lower prices."

"As a result, entrepreneurs in the sector are in an uncomfortable situation," Khokon noted.

The BTMA in its proposal to the agriculture ministry said the fumigation charge of each bale of raw materials has been raised to Tk50 this fiscal year from the previous rate of Tk10, while the sampling charge has been increased to Tk20 which previously was Tk5.

The increased charges need to be withdrawn, the textile owners recommended in their proposal.

Fumigation is the method of using certain gases for maintaining the standard of thread. This is done in order to control bacteria, insects and diseases in yarn. Fumigation is mandatory on threads of the USA and Brazil.

For import permit applications, the importers of raw fibres earlier needed to pay Tk10 on the first one tonne and Tk1 on each tonne after that. This year the rates have been raised to Tk50 and Tk5 respectively.

Moreover, the importers could open several letters of credit (LCs) with one import permit application.

However, under the present regulations, one import permit application can only be used for opening one letter of credit.

BTMA wants that the changes brought into regulations are also annulled.

PM's Private Industries Adviser Salman F Rahman, while addressing the meeting, said Bangladesh was dependent on imported cloths. However, the local industries are now producing enough cloths to meet the entire local demand.

The hike in fumigation charge has left the textile industry in a difficult situation, he observed.

Pointing out that the amount of cotton produced in the country is much less than the actual demand, Agriculture Minister Abdur Razzaque said that there is scope to take the matter of fumigation charge into consideration.