Apparel exporters yesterday expressed concerns over a sudden rise in furnace oil prices, saying the hike would push up production costs and cut competitiveness of local products.
“The production cost will go up due to rise in the prices. It will also cut our competitiveness in the global market,” said Abdus Salam Murshedy, president of Bangladesh Garment Manufacturers and Exporters Association (BGMEA).
He said exporters are now making apparel products at prices negotiated earlier. Production is now going on according to prior orders.
“If we are now forced to buy furnace oil at higher prices then the production will be hampered. As a result, the sector will not be able to make the most of opportunities emerging in the global market thanks to the global meltdown,” Murshedy said in a statement.
The government on Monday raised the price of furnace oil, widely used in industrial units, by Tk 9 per litre, and set the new price at Tk 35 at consumer level, effective from yesterday.
The price adjustment, however, the first in nearly two years, is for an interim period, the government said.
Power ministry officials said the rise in prices would increase the tariff of the newly-installed and under-implementation furnace oil-fired plants, and the government will have to buy electricity from those plants at a higher rate.
The rise in prices of furnace oil has been in stark contrast to BGMEA's longstanding demand that diesel and furnace oil used by captive generators should be subsidised until energy situation in the country improves.
Murshedy said the apparel sector has so far weathered the impacts of the economic crisis, thanks to the “sincere efforts” from all stakeholders. As a result, exports grew 42.18 percent in the first half of fiscal 2010-2011.
“It will be tough to maintain growth due to the sudden rise in furnace oil prices,” said the BGMEA president.
He said the production cost of the apparel items has already soared compared to competitors due to implementation of new wage structure across the sector, gas and electricity crisis, high bank interest, increase in ships' turnaround time and price hike of raw materials such as yarn and cotton in global markets.
The furnace oil used in garment units should be sold at previous rates, the BGMEA president demanded.