Tanners get BB incentive for factory relocation

The central bank yesterday declared an incentive package for tanners to help them move hazardous factories to a designated industrial park in Savar.

Tanneries which have already moved there from the toxic tannery hub of Hazaribagh or under process to do so will get an opportunity to shift their irregular loans into block accounts and will have eight years for repayment, with a one-year grace period, Bangladesh Bank said in a notice.

Tanners will be charged 10 percent interest on the loans in the block accounts or banks' cost of fund or whichever is lower.

"I hope banks will respond accordingly for the sake of the nation," BB Governor Atiur Rahman told The Daily Star.

The BB also allowed banks to consider relaxation of the existing downpayment while rescheduling old loans or awarding new loans for tanneries involved in exports.

However, fresh collateral has to be shown in getting new loans if there is any deficit in security money.

Tanners will be able to free their collateralised property if they can show equal collateral. To take the incentives, tanners will have to begin the process of relocation within the next six months, the BB notice said.

The central bank is encouraging the relocation of tanneries as part of its efforts to promote green banking, the governor said. "The banks will ultimately reap the benefit."

The government has taken a number of initiatives and made investment to relocate the polluting tanneries from Hazaribagh. Bankers and tannery owners have welcomed the BB move.

"I think banks would come forward in extending their support so the tanneries are relocated. We also want this from environmental concern," said Anis A Khan, vice chairman of the Association of Bankers, Bangladesh, a platform of chief executives of private banks.

The central bank directive is also in line with the demands of the tannery owners.

Shaheen Ahmed, chairman of Bangladesh Tanners Association, said: “It is a good initiative. The directive will accelerate the relocation process."

He also urged the central bank to take necessary steps so that banks comply with the directive properly.

The amount of irregular loans with the tannery sector now stands at around Tk 450 crore, of which Tk 250 crore is accrued interest, he said. Tannery owners also urged the government to provide long-term loans at single digit interest to expedite relocation.

The tanners will have to invest around Tk 6,000 crore to relocate the factories, set up new plants and begin commercial production, Ahmed said.

The industries ministry has already allocated plots on the 200-acre leather estate in Savar to 155 tannery owners through Bangladesh Small and Cottage Industries Corporation, a wing of the industries ministry that is implementing the project.

Industries Minister Amir Hossain Amu had earlier threatened to cancel the allocation if tanners fail to relocate the factories by March next year.

About 80 tanneries have started the process of relocation, according to the tanners' association.

The leather industry brought home $1.29 billion last fiscal year, crossing the one-billion-dollar mark for the first time, according to Export Promotion Bureau. Exports of leather goods rose 48.55 percent year-on-year to $240.09 million during the period, leather 26.47 percent to $505.54 million, and footwear 31.19 percent to $550.11 million.