Ensure special policies and separate utility pricing for steel industries

Bangladesh Steel Re-rolling Mills (BSRM) is the largest steel manufacturing company in the country, with eight factories producing 17 lakh tonnes of mild steel rods annually. Despite a drop in demand after the pandemic, the company continued production without laying off workers. Currently, BSRM employs 4,500 people.

In an interview with The Business Standard, Aameir Alihussain, managing director of BSRM, told the story of his company's long journey and successes since its inception. 

The interview was taken by TBS's Chattogram Bureau Chief Shamsuddin Illius and Staff Correspondent Jobaer Chowdhury.

How did BSRM's journey start? How has your journey been so far?

BSRM began steel production in Chattogram in 1952. Following the partition of India in 1947, our family migrated from Gujarat, India to then Pakistan and settled in Chattogram in 1948.

Then, we were involved in trading mostly between East Pakistan and West Pakistan. Our family established a rolling factory in Chattogram in 1952 seeing the opportunity here, it was first amongst the mild steel industries set up in then East Pakistan. The first product was grade 40 steel, and the family continued to innovate and expand production capacity. 

The ship-breaking industry also began its journey in Bangladesh and our family was a pioneer in this. Following the liberation war in 1971, our property was nationalised, with the state taking control of most industries, which affected our plans and growth. 

But Bangabandhu Sheikh Mujibur Rahman visited our plant after independence, recognising our family's desire to stay and invest, in 1972, everything was returned to us. We had to start all over again as the condition in which the assets were returned were not the same as before and new effort and investment had to be put in to restart the business. 

The industrial sector was not good at the time, but we invested and launched a semi-automated plant in the 1980s. We produced grade 60 steel according to international standards. In the post-1990 period, the industry expanded, and our company adopted new technologies and machinery to expand its business.

Bangabandhu's vision and goals amid the weak economic conditions led to the construction of large industries and the return of industries to the private sector. This decision transformed the country, and today's BSRM exemplifies the impact of a good government policy and shows how a decision at the top affects various strata of the society. 

Due to the dollar crisis, all the industries of the country have suffered. How did BSRM deal with it?

Availability of raw materials will become uncertain if letters of credit (LCs) are not opened as per the requirement. As a result, production will decrease. Reducing production at the plant will increase costs. Product prices will also increase. 

Cost reduction is not possible if we cannot open LCs at this time. We are facing a very challenging time. We have been unable to import materials as required. The dollar devaluation resulted in huge losses last year. We hope there will be no further devaluation. 

How was your manufacturing operation during the nationwide energy crisis?

The oil and gas crisis, caused by import complications, led to disruptions in electricity and gas supply at the factory, impacting production. Raw material shortages and utility crises have raised production costs. Simultaneously, reduced demand has further exacerbated the situation. The economic crisis has slowed down ongoing projects nationwide, affecting industries related to infrastructure development like steel, cement, and paint. As a nation, we have to continue nation building activities and financing plans need to be made by the government to keep development momentum continued. 

How did BSRM work during the pandemic?

When everything was shut down, the demand for the products was low. But the stimulus given by the government helped us. We did not downsize during the pandemic.

Our officers and employees suffered a lot. We kept our factories in operation. We had to reduce our production by 30% during the pandemic. At that time, our sales went down sharply, and yet we were continuing production and building up stocks. Fortunately, now the pandemic is over but unfortunately the current global situation due to the Russia-Ukraine war has created many economic problems for our beloved country and we need to stay strong to weather through these troubled times. 

What is the future of the steel sector? What should be done to deal with the crisis? 

It took 40 years for the apparel industry to reach where it is today. Policies have been made to support the industry. There is policy support for EPZs. That is why they are doing well. Good policies can uplift any industry. Policies are different for local and export-oriented industries. A serious reform of policies is needed, such as income tax of 10-15%, single digit VAT and other policies like in EPZ. That way, the private sector will be able to be motivated to show a much better performance.  

Amid the dollar crisis, the import of steel raw materials has decreased, putting the industry in a crisis. Import of raw materials should be continued to maintain production. Steel is an integral part of the country's ongoing development and megaprojects, so steel should be declared an essential commodity. Freight charges increase due to the lengthy process during import of raw materials. The industry also needs priority berthing facilities at the port.

The government must also ensure the availability of dollars and a future strategy must be formulated in this regard. 

Apart from raw material costs, utilities, especially electricity and gas, significantly impact expenses. Other countries offer special utility facilities for industries. We need to separate utility pricing for steel industries, as utility costs are the largest cost in reduced production besides the main raw materials.

Preparing for the future is crucial. Boosting foreign exchange reserves should be a priority. For this, increasing remittances and export income should be prioritised.

To boost the economy, the government must diversify the export basket beyond the garment industry and prioritise increasing exports. Taxation reforms are essential, including lowering income tax and VAT rates and making their policy and rules simpler.

Overburdening existing sectors and taxpayers could worsen the crisis, leading to decreased investments. Instead, taxes should be collected from other sectors, broadening the scope. Simplifying tax and VAT policies is crucial, encouraging production by providing relaxations in these areas. By expanding the export basket and offering policy incentives for increased production, revenue can be enhanced effectively.

Logistics cost in our country is very high, starting from import freight to transportation around the country. We should make Roller-Compacted Concrete (RCC) roads and highways or motorways to increase truck load limits. There will be huge savings on the number of vehicles on the road, fuel and other costs, and therefore it will save the country's forex reserves. 

No industry can grow without a supportive policy.

Tell us about the export potential of steel.

Bangladesh possesses significant potential in steel export trade, thanks to abundant manpower and economic zones. However, to fully tap into this potential, facilities need improvement. While our steel plant capacity and operations rank among the world's best, the overall cost remains high, mainly due to logistics and taxes. 

What is BSRM's view on climate change and production management?

We produce steel by reusing steel scrap and therefore are a recycling industry. We run an eco-friendly industry as the extent of carbon emission is very low in our steel-making process. We also have air pollution control systems in place. We have attained international recognition for reducing carbon emissions. 

We have a 0% waste production process, as we convert our main waste material (slag) into a reusable product. We manufacture road dividers from slag and provide to authorities as a safety measure. Slag is also a substitute material of brick chips, which is cost effective and also environmentally-friendly and can also be used in road development.