Textile sector crying out for investment | The Daily Star
12:00 AM, September 27, 2017 / LAST MODIFIED: 12:00 AM, September 27, 2017

Textile sector crying out for investment

Bangladesh's primary textile sector, an essential cog in the garment export wheel, has been witnessing a dearth of fresh investment for the last few years due to gas crisis and scarcity of bigger industrial land.

Only five new spinning, three weaving and two dyeing mills with an investment of about Tk 1,300 crore were set up in the last four years, according to data from the Bangladesh Textile Mills Association.

The textile sector needs heavy investment and bigger industrial plots to set up the plants.

The primary textile sector indicates the strength of a country's garment sector as the millers and spinners supply the yarns and fabrics to the apparel manufacturers, who cater to the international clothing retailers.

A more developed primary textile sector means shorter lead-time in the garment business as the apparel makers can purchase the raw materials from the local market.

Currently, Bangladesh has 425 spinning, 790 weaving and 250 dyeing mills that have an investment of about Tk 50,000 crore tied up, according to BTMA data. 

With existing capacity, the primary textile sector can supply 90 percent of the raw materials for the knitwear and 40 percent for woven sector.

The rest of the demand is met through imports mainly from China, India and Pakistan. Since the country's garment export is on the rise, so is the import of raw materials.

In the first six months of the year, Bangladesh imported woven fabrics worth more than $2.11 billion and knitwear fabrics and yarn worth $527 million, up almost 15 percent year-on-year in both the categories.

The import of fabrics is also rising as the garment manufacturers can now enjoy zero-duty benefit on export of apparel items to the EU and other major markets even if the garment is made from fabrics not manufactured in Bangladesh.

“So, there is room for more investment in the sector. We need only gas connections and industrial plots,” said Monsoor Ahmed, secretary to the BTMA.

At least five spinning mills cannot go into operation mainly due to a lack of gas connections, although the owners have constructed the factories by investing a lot of money, he said.

The hike in gas prices every year is also another problem for the sector.

The government raised the gas price to Tk 19.26 per cubic metre in 2016 from Tk 8.36 in the previous year for captive power plants. In 2015, the government had increased the gas price to Tk 8.36 from the previous rate of Tk 4.36 per cubic metre.

The textile millers have demanded duty-free import of heavy fuel oil or furnace oil to keep their factories up and running. Currently, importers pay 35 percent duty to import the oil, which, they say, was too high for users.

They said the tariff of gas was hiked 222 percent in the last two years, which was eating up the profitability of businesses as spinning, weaving, finishing and dyeing mills need uninterrupted gas supply.

“We have already started talks with the government to make fuel oil import duty-free so that the primary textile sector can run well,” said Tapan Chowdhury, president of the BTMA.

The government has not fixed the prices of liquefied natural gas yet although it was saying that its import would start from next year, he added.

“If LNG price is fixed at a higher rate, the industrial sector might not be able to afford it.”

The government plans to import 500 million cubic feet of gas a day (mmcfd) from the start of next year and another 500 mmcfd from the middle of 2018 to ride out the existing gas shortage.

“The time now is very much favourable to setting up new primary textile units,” said Razeeb Haider, managing director of Outpace Spinning Mills.

One of the reasons is that the bank interest rate declined to a single digit after many years.

“We have a lot of opportunities to diversify our business in the textile sector,” he said.

Many factory owners have expanded their current operations as they cannot set up new units.

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