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Primary textile sector is in the cross road

mr.jahangirBangladesh Textile Mills Association (BTMA) is the trade body for the Primary Textile industries in Bangladesh. Its member factories are producing yarn, fabric and processing those to cater the demand of export oriented RMG industries. BTMA also caters yarn and fabric for apparel and textiles for domestic consumption. The PT sector is capital intensive as these are technology driven and so they require huge power as well to run that machinery.

All most all the PT industries have their own power generation facilities hence they depend on primary power generating fuel namely gas, oil and coal. Surely the sector is in a cross road while they see huge opportunities from demand side but there are several factors that are hindering the investment. Cotton is the main raw materials for these mills which are almost fully import based. With sharp reduction in cotton price the sector is facing a great immediate problem. To discuss all these issues BTT has visited current BTMA president Mr. Jahangir Alamin.

RMG export is increasing PT is almost stagnant?

Spinning, weaving and processing industries are more power consuming sector than RMG and so investments in PT is more affected due to the shortage of gas. Many of our investment and their proposals are held due to no gas. Our existing factories are underutilized due to gas shortage. Despite these problems we are trying our best to support the export oriented RMG industry.

On the other hand to understand the significance of PT sector we will also have to consider its contribution to the huge local consumption. Our industries are serving the major textile requirements of the country. So, the sector is not stagnant it is also growing.But it is true that investment is less or almost no,when we consider setting up of new facilities. We are now investing in replacing less efficient machinery with high efficient machinery to increase production with less energy consumption.

What are the main factors that hindering investments?

It is nothing but the energy shortage and high cost of capital. If you see the demand side, you will understand that we have great opportunities and it is within our country. Now we are supporting 90-95 percent backward requirements of our knit garment factories, 40-45 percent backward requirements of our woven garment factories and additionally we are catering huge domestic demand for textiles. And all these sectors are growing fast and so a potential demand is there. Now to cater these demands we just have to invest more and produce more efficiently. Both the things are affected due to huge shortage of basic fuel for our industries that is gas. On the other hand due to high interest rate our products price is higher than competitive countries.Bank interest here in Bangladesh is the highest among most of the competitors. High cost of capital and less utilization of machinery due to gas shortage are the main reasons why our production cost is high and new investments are not coming.

Two years back you mentioned the same problem and till now no change in the scenario?

No change, we are suffering for these and everybody knows it. Even after that till now we don’t have any energy policy. There may be shortage of gas but government should give full picture, a policy and a road map. We are ready to invest in other energy sources but we don’t know which one to do. Now we are investing on gas based power generation and then we don’t have gas supply.Some of us invested in furnace oil and diesel based which are costly. If we move to coal based generation we need to have full policy and infrastructural support for that. So, the sector is in dark and our existing and future investments become vulnerable.

What are the initiatives you have taken to put pressure on the government for solving these issues?

We have been demanding the same from government for long time but we didn’t get any result yet. But we are still hopeful that things will be solved and we will get complete plan and policy from government on energy sources and supplies. We urge the government also to reduce interest rate as if we can remain competitive. Our existing factories should get uninterrupted gas supply otherwise our huge investments will be underutilized and country will lose a huge production. Please remember, BTMA members possess the biggest investment in manufacturing sector in the country. We are worried for this winter season, usually gas supply get worse in winter and so our production goes down. During last fertilizer production season we suffered a lot. On an average in 7 months in the year we don’t get full supply of gas.

What is the pattern of domestic market for fabric and garment?

In each market you will see there are different segments. In Bangladesh a part of high end fashion market is catered by imported garments and textiles otherwise all demand is being catered by local manufacturers. BTMA is proud to be able to be import subsidy industry saving huge amount of foreign currency. But recently our factories are affected due to the huge leakage of apparels products from export oriented RMG industries. You will see the men apparel market particularly is flooded with international brads products made in export oriented RMG industry which are leaking out. Those products have enjoyed all government subsidies for export goods but being sold unlawfully in the local market. This is an unequal competition for our fabric mills.

So, what is the solution?

We don’t tell to fully stop the selling of left out garments or stock lots in the domestic market, we propose that there should be a policy and we urge to make sure proper implementation of that policy from the government that will balance the situation for local fabric makers. Export oriented RMG can import fabric and all other accessories duty free, they have other export subsidies as well but for the fabric mill who is producing for local market they don’t have that. The bond arrangement should make the market equal for all.

Cotton price is going down; your yarn price is going down as well?

Spinning mills in Bangladesh really cannot enjoy the benefits of cotton market price fluctuations because we cannot do hedging in cotton open market. We don’t have capacity to invest in future options in cotton stock market and our banking system doesn’t allow it as well. So, we just pay at the price of cotton at the buying point and our yarn price moves with global market trend. We cannot plan and get benefit of cotton price. Rather now many of our factories are greatly affected as they have bought cotton as a higher price and now they have to sell yarn at a much lower price. Our competitors like India don’t have this problem as they don’t need to store cotton and they have much less voyage time. So, they can play on the cotton price and then our industries suffer for those situations. So, cotton price fluctuation in fact bring no benefit rather affect us badly, we like price stability.

What initiative BTMA has taken for cotton hedging?

We have urged to Bangladesh Bank to allow money transfer for cotton hedging. They have proposed a framework which will not help at all. We need to keep potential amount of money to be stored in the options market account to buy and sell to get advantage of the option market. It is not possible to buy and then arrange to transfer money. So, cotton hedging is not that likely to happen soon, but we are suffering a lot for this.

If anyone has any feedback or input regarding the published news, please contact: info@textiletoday.com.bd

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