Textile millers ask for more subsidy

Textile mill operators yesterday demanded a hike in cash subsidy to 15 percent from the existing 5 percent, as the stockpiling of unsold fabrics and yarn is increasing on the back of the latest move by the EU on Rules of Origin (RoO).
The stockpiling of unsold fabrics and yarn is increasing in Bangladesh for two reasons --relaxation of the RoO by the EU and sale of yarn by India at a dumping price, said Jahangir Alamin, president of Bangladesh Textile Mills Association (BTMA), at a press briefing at the association office.
He said garment makers prefer importing fabrics from countries such as China and India after the relaxation of the RoO by the EU-27 countries, because they now get duty-waiver to Eurozone even if the garment is made from imported fabrics.
The EU has relaxed the RoO for the least developed countries (LDCs) from January 1. Being an LDC, Bangladesh also enjoys the zero-duty facility on export of goods to EU. The LDCs now get 12.50 percent duty waiver on exports to EU.
Previously, the country's primary textile sector (PTS) remained shielded for decades, as the garment makers were bound to purchase fabrics from the domestic market to enjoy duty-waiver from the EU market.
But, after the transformation of RoO under Generalised System of Preferences (GSP) by the EU -- to one stage from two-stage transformation -- the PTS is facing trouble as the garment makers can get the waiver in case of using imported fabrics also.
He said India is now selling yarn to Bangladesh at a dumping price. "India has imposed a ban on export of raw cotton, but they opened up the export of yarn," he said.
Bangladesh is an importer of cotton, while India is the second largest producer of this white gold fibre.
As a result, India has an advantage in yarn production, which Bangladesh does not have. "So, India can sell the yarn at a dumping price," he said.
He said the imports of woven fabrics by the garment makers increased by 88.34 percent and knitwear fabrics by 32.35 percent during the January-March period of this year compared with the same period last year.
Alamin said orders worth Tk 2,000 crore were shifted from Bangladesh to other countries when the local spinners failed to supply raw materials to the garment makers at lower prices recently.
Now, the stockpiling of unsold yarn reached two lakh tonnes worth Tk 8,000 crore. The total investment of Tk 30,000 crore in the spinning, weaving, dyeing, printing and finishing sub-sectors will be at stake if the government does not take immediate steps to help the sector.
The BTMA chief also said Bangladesh produces eight lakh tonnes of yarn per year from raw cotton imported mainly from the US, India, Uzbekistan, Pakistan and some African countries.
Showkat Aziz Russell, vice-president of BTMA, said the textile mills cannot utilise more than 35-40 percent capacity due to acute shortage of gas and power in the industrial sector.
"The problems faced by the local textile sector have compounded when the competing countries stopped export of cotton and set safeguard measures to protect their own industries," he said.