More than 30 per cent production capacity of local textile mills has remained unutilised for long as garment manufacturers are increasingly sourcing their raw materials from abroad. The latter are 'capitalising' on the liberalised rules of origin by the European Union (EU).
Millers said, low pressure of gas and electricity supply disruption and poor transportation system have pushed up prices of their manufactured fabrics, making those unattractive to garment manufacturers.
Readymade garment (RMG) units, which used to prefer local fabrics and yarn, have also been increasingly turning to other destinations, such as China and India, for sourcing, they added.
"With sluggish demand in RMG units and shortage of gas and electricity, over 30 per cent of our production capacity now remains unutilised round the year," Mohammad Ali Khokon, Managing Director of Metro and Makson Spinning Mills Ltd, told the FE Thursday.
He said the RMG owners used to prefer local products because of better benefits in making payments and altering materials (if necessary), but high prices of our produces forced them to consider sourcing their raw materials from other countries.
"My factory has a capacity of producing 23 tonnes of yarn per day but I could not produce over 15 tons daily for the last one year," he added.
He claimed a considerable number of small and medium textile mills were facing closure due to the current situation.
Director of the Bangladesh Textile Mills Association (BTMA) Engineer Ahmed Ali told the FE that those who increased their production capacity following a tremendous export growth in the financial year (FY) 2010-11 are the worst victims of the present situation.
According to him, many of their fellow businesses have increased production capacity following the sudden rise in demand in the year 2010.
But relaxation of rules of origin by the EU and low pressure of gas and electricity and some other bottlenecks have pushed up production cost of local fabrics and put the local millers in an uncertain situation.
Bangladesh has achieved over 40 per cent export growth in RMG in the FY-2010-11 but due to global economic meltdown and euro zone crisis, the RMG sector could not maintain the continuity and made only a marginal growth.
However, after declaration of one-step GSP (generalised system of preferences) by the EU, local RMG owners got the right to purchase cotton and cloths from any destination at competitive prices.
But due to expansion and unutilised capacity, production cost of local mills has gone up, throwing the millers into an uncertain future as local RMG makers are not sourcing cloths from local mills.
The BTMA director, however, expressed his deep concern over the gloomy situation of business and urged the government to take urgent steps to remedy the situation for sustainability of the local textile mills.
"After declaration of one-stop GSP by the EU, local millers have to compete with the international rivals. So they should be ensured smooth supply of gas and electricity," Mr Ahmed Ali informed.
"If the government doses not provide necessary supports to local mills, then they will face uneven competition with their foreign rivals and might face the fate of jute sector."
© 2024 - All Rights with The Financial Express
