Textile mills under piles of unsold yarn, fabrics

Ziaur Rahman

22 February, 2019 12:00 AM printer

The country’s textile industries, especially the spinning and weaving sub-sectors, have been facing a tough situation as most of the mills are reeling under huge stockpiles of unsold yarn and fabrics worth around Tk 2,500 crore.

Industry insiders said the local market is flooded with illegally imported yarn and fabric, hitting the primary textile industry hard and depriving the government of huge revenue.

Meanwhile, the huge influx of fabrics allegedly due to leakage of bonded warehouse and smuggling of low-cost yarns dragged down the prices of yarns by 12-15 per cent in the local market over the last few months. Widely used 30-carded cotton yarn is now available at $2.90-2.95 a kg in the local market as against $3.25-3.30 a few months ago.

Due to this illegally imported yarn and fabric, a huge amount of locally produced yarns and fabrics worth around Tk 2,500 crore remained unsold in various local textile mills, industry sources claimed.

Bangladesh Textile Mills Association (BTMA), the apex business body of private textile mill owners, has already informed this to authorities concerned, including the National Board of Revenue (NBR) and requested them to take measures to check illegal imports.

The BTMA leaders also met the Prime Minister’s Adviser on Private Industry and Investment Salman F Rahman very recently and requested him to take necessary measures to stop this malpractice in the textile sector.

Since fabrics and other clothing are being imported illegally without any duty, they are cheaper than local items. Textile and apparel experts expressed concern as the misuse of bonded warehouse facilities has become widespread while imported yarns and fabrics are flooding the local market.

At the same time, some traders are importing a high count yarn through false declaration evading the taxes, said a local textile miller. The price of 80 count of yarn is about Tk 520 a kg and the price of 30 count of yarn Tk 235 a kg, and some businessmen are often importing 80 and 60 count of yarns in the name of 30 count of yarn.

Though the volume of commercial imports of fabrics is not very high because of high import duty, sarees, three-pieces and other clothing from neighbouring countries even from China are flooding the local market, said the entrepreneurs.

They also alleged that the readymade garment (RMG) manufacturers import fabrics through UD facilities and a portion of these are illegally sold in the local market.

If the government does not rein in the illegal fabric import, the textile sector may not be saved,” said an official of BTMA, adding that many of the mills have already reduced their production. BTMA President Mohammad Ali Khokhon in his statement submitted to the Prime Minister’s advisor Salman F Rahman said the local spinning and weaving mills are at risk of closure as they are not getting fair prices for yarn and fabric produced by them because the items imported under false declaration and duty-free import facilities have been flooding the local market.

The BTMA chief noted that the sale of local yarn and fabric has also declined drastically. As a result 50 to 60 per cent of the looms remained closed for a long time.

Woven dying mills have reduced their capacity below 40 per cent while export-oriented spinning mills are forced to sell their products at lower rates than their production cost, resulting in a huge stockpiling of yarn and fabric, he noted.

“If the situation prolongs, factories may be unable to pay wages,” he said, cautioning “Factories might have to be closed down due to liquidity crisis.”

Khokhon also urged the government to fix the bank interest rate at single digit and extend the instalment repayment time to additional 10 years, the continuation of 15 per cent tax rate till 2028, and the inclusion of yarn and fabric as VAT exempted items.

The other demands of BTMA include increasing the cash incentive to 7.0 per cent from existing 4.0 per cent, strong monitoring to stop import under false declaration and misuse of the bonded warehouse facilities.

The country’s primary textile sector includes spinning weaving, printing, dyeing and finishing. The sector has been playing an important role as the backward linkage industries for woven and knitwear garments by supplying fabrics and yarn until this year.

Currently, the primary textile sector has the capacity to meet the demand for more than 80 per cent of fabric requirements by knitwear and 40 per cent of the same by woven sub-sectors of the readymade garments (RMG) industries in Bangladesh, the textile business circles stated.

To meet the growing demand for fabrics and yarn, Bangladeshi investors made a total of Tk 70,000 crore investments in the primary textile sector, the backward linkage industry for the readymade garments (RMG) sector.

The industry also saw an investment worth Tk 6,900 crore in the last five years, owing to growing demand for fabric and yarn. 

As per BTMA data, there are about 430 yarn manufacturing mills, 802 fabrics manufacturing mills, and 244 dyeing-printing finishing mills in Bangladesh, along with 32 denim fabrics manufacturing and 22 home textile manufacturing mills.