Abuse of Bond Facility

Local BOPP producers struggle to survive

Sohel Hossain Patwary

1 April, 2019 12:00 AM printer

Local manufacturers of BOPP films used in the packaging, labelling and lamination products are not getting the scope to flourish due to misuse of bond facilities and lack of government policy support.

Local companies are facing uneven competition in local market as duty-free BOPP films imported under the bonded warehouse facility are being sold legally.

BOPP films production earlier was totally import-oriented in the country. Local company Akij Group started producing BOPP films for the local market a year ago. But the company is facing many barriers including lack of policy support and abuse of bonded warehouse facility. 

BOPP films are currently imported under three categories—-commercial imports, as raw materials of industries and bonded warehouse category.

Commercial importers have to pay around 38 per cent VAT, including 10 percent customs duty, 15 percent VAT, 5 percent advance income tax and 5 percent advance tread VAT.

But, hundred percent export-oriented companies are importing BOPP films without any duty and they are not allowed to sell the item in the local market.

Akij Biax Films Ltd, the local producer of BOPP, sells the items at Tk 202 a kg while the importers  have to spend Tk 205 a kg including tax and VAT. But the export-oriented companies import BOPP films at only Tk 155 a kg.

Akij Biax officials said the production cost of non-hit transparent films of Biax is around Tk 201 including all kinds of taxes. But they have to face a loss of Tk around 10-15 per kg as duty-free bonded products are available in the local market.

Owing to the growing demand of BOPP, Akij Group in 2018 established the Akij Biax Films Ltd having the capacity to produce 42,000 tonnes BOPP a year. Akij has been producing eight kinds of BOPP films. But the local company is facing uneven competition as the sale duty-free BOPP films is rampant in the local market.

Local producers of BOPP films have sought government policy support so that they can survive in the local market. They also demanded to check the misuse of the bond facility to prevent illegal sales of duty-free products in the local market.

Sheikh Bashir Uddin, Managing Director of Akij Biax Ltd, said that if the trend of bond misuse continues, they will have to stop producing BOPP films. This will make this sector depend on imports.”

“There is a demand of 20,000 tonnes BOPP products in the local market. That’s why it is important to prevent illegal sales of BOPP items imported under the bonded warehouse facilities,” said Bashir Uddin.

He also said if the government provides policy support to local companies and reduce import duty on raw materials, local companies will be able to meet the local demand and flourish their business.

Akij Group has also submitted an application to Bangladesh Tariff Commission for a mass hearing to find a solution for saving this local BOPP films manufacturer. 

BOPP films (Biaxially Oriented PolyPropylene Films) are produced by stretching polypropylene film in both machine direction and transverse direction.