In a bid to safeguard local spinning mills, apparel exporters and spinners have agreed on a proposal to exclude certain types of yarn from the duty-free bonded-warehouse facility and will soon request the government to take necessary action in this regard, industry insiders said.
The move comes in response to concerns over the competitive disadvantage faced by Bangladeshi spinners, who are struggling with the influx of cheap yarn from India.
Industry representatives noted that Indian spinners are offering yarn at prices up to 30 cents per kilogram lower than their production costs, largely due to state subsidies.
This, they argue, is distorting the local market and putting domestic manufacturers at a significant disadvantage.
Industry representatives further claimed that Bangladeshi apparel exporters are not benefiting from the lower yarn prices. Instead, the benefits are flowing to global apparel buyers due to open costing methods.
Meanwhile, local spinners are facing severe challenges due to a lack of orders, with many mills reportedly operating at just 50-60% of their production capacity.
In addition, domestic mills are said to have amassed yarn stockpiles valued at nearly Tk120 billion, further exacerbating the financial strain on the industry.
In a meeting on Wednesday last, leaders from the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), and the Bangladesh Textile Mills Association (BTMA) reviewed the overall industry situation and agreed to jointly appeal to the government on the proposal.
BTMA officials said a letter regarding the proposal would be submitted to the Commerce Adviser today (Tuesday). Copies will also be sent to the National Board of Revenue (NBR), urging the authorities to take necessary measures.
Meeting sources said the business leaders agreed to request the government to exclude certain categories of yarn from the bonded warehouse facility to protect local industries and create a level playing field for domestic and international spinners.
They mentioned that Bangladeshi apparel makers mainly import 30s single and 28s count yarn from India, considering the price advantages and buyers' nominations.
They believe that by excluding these types of yarn from the duty-free facility, buyers would be less likely to nominate imported yarn in place of locally produced yarn, providing a boost to local spinners.
If the government excludes these types of yarn from the duty-free facility, buyers would no longer be inclined to nominate imported yarn in place of locally produced yarn, they added.
BTMA officials said the BGMEA, BKMEA and BTMA leaders also agreed to establish a monitoring cell to oversee Proforma Invoice (PI) issues, honouring of progress payments, and yarn price-related matters. The monitoring cell will sit at least once every three months.
Speaking at an event on Sunday, BTMA President Showkat Aziz Russell said that yarn imports from India increased by 137 per cent in the last fiscal year. Indian traders have been dumping yarn in Bangladesh at prices 30 cents per kilogram lower than market rates. As a result, around 50 spinning mills in the country have shut down, involving investments of Tk 5-7 billion. Restarting these mills will be difficult, he added.
According to the BTMA president, Indian spinners export around 44 per cent of their total yarn output to Bangladesh.
"The price at which Indian traders are exporting yarn has led to nearly Tk 120 billion worth of yarn remaining unsold at domestic spinning mills," he said.
"We do not want yarn imports from India to be stopped. What we want is a reduction in the trade deficit. Increasing dependency would not be wise. If that happens, the backward linkage industries of the ready-made garment sector, and eventually the garment industry itself, will suffer significant damage," he said.
Talking to The Financial Express, former BTMA director Razib Haider Munna said that by using imported yarn, Bangladesh would not be able to maintain double-stage value addition, which will become mandatory after graduation from the least developed country (LDC) status.
"Considering this, we have requested the government to exclude those types of yarn that Bangladesh has the capacity to produce fully -- 100 per cent cotton yarn, polyester-cotton yarn and carded cotton yarn," he said.
Speaking to The Financial Express after the meeting, BKMEA President Mohammad Hatem said the associations had reached a consensus considering the interests of local spinning mills.
He also mentioned that nearly 50-60 per cent of BKMEA members are SMEs and are unable to use the bonded warehouse facility to import yarn duty-free.
"This exclusion will make them competitive with bonded-facility users during negotiations with buyers," he added.
He further said that although some entrepreneurs opposed the move, they agreed to make the request to the government in the greater national interest.
newsmanjasi@gamil.com
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