Leaders of the apparel and textile sector have urged the government to overhaul the existing cash incentive structure to enhance the competitiveness of local spinning mills.
Without targeted support, the primary textile sector could continue to lose ground amid rising costs and weak global demand, they warn.
They have proposed shifting incentives to the yarn pricing stage at the point of sale, rather than the current export-linked mechanism, to ensure direct benefits for spinners and stabilise the supply chain for garment exporters.
The call comes ahead of a meeting of the Ministry of Finance with key stakeholders, including the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), and the Bangladesh Textile Mills Association (BTMA), about the yarn import issue.
The meeting will be held at the Ministry of Finance, with the finance adviser and other relevant stakeholders expected to attend.
"Following a request from the BTMA president at an earlier meeting, apparel exporters urged the government to increase cash incentives for yarn producers so that they can remain competitive against imported yarn," said a ministry source.
BTMA President Showkat Aziz Russell said the incentive mechanism needed to be redesigned so that spinners could receive support through yarn prices during sales.
"The incentive should be linked to yarn prices at the time of sale. This will directly support spinners and help reduce costs for garment manufacturers," he said, adding that the existing system did not adequately address the cost pressures faced by domestic spinners.
Russell also cautioned that Bangladesh risked losing competitiveness to countries such as India, where a range of policy support initiatives, including energy subsidies and production-linked incentives, helped textile producers remain globally competitive.
Echoing similar concerns, Mohammad Hatem, president of BKMEA, said the incentive structure should clearly distinguish between indirect and direct support mechanisms.
"If the incentive is routed through apparel exporters, a 5 per cent incentive will be reasonable," he said.
"However, if the government wants to provide incentives directly to spinners, the rate should be at least 10 per cent to have a meaningful impact."
He also suggested the government consider providing subsidies on energy prices, particularly gas and electricity, which accounted for a significant portion of production costs for spinning mills.
BKMEA Executive President Fazlee Shamim Ehsan said the mismatch between rising input costs and limited policy support had put severe pressure on the sector.
"Without rationalising energy costs and aligning incentives with production realities, it will be difficult for spinners to survive, let alone invest in capacity or modernisation," he said.
Meanwhile, BGMEA Vice President Md Shehab Udduza Chowdhury said a sustainable incentive framework for spinners was crucial to protect the country's apparel value chain.
"A competitive spinning sector ensures supply security, shorter lead times, and better price stability for garment exporters," he said, adding that any reform should be designed in consultation with all stakeholders.
Industry leaders stressed that timely policy intervention was essential to safeguard backward-linkage industries and maintain Bangladesh's competitiveness in the global apparel market amid the ongoing economic uncertainties.
In a recent letter to the National Board of Revenue (NBR), the Ministry of Commerce recommended suspending the duty-free import of some yarn counts ranging from 10 to 30 under bonded warehouse facilities to protect the local textile industry.
Apparel entrepreneurs opposed the move, warning that such a decision could hurt exports.
If implemented, the move could significantly increase yarn import costs, affecting both textile and apparel sectors, they said.
Ministry officials said the initiative aimed to protect domestic spinning mills and increase local value addition in export products.
They added that imposing duties could raise the cost of imported yarn, while local mills had sufficient production capacity to meet international standards.
Duty-free imports, however, had placed domestic mills at a competitive disadvantage, they said.
Garment entrepreneurs termed the initiative a "self-destructive decision for exports".
With already weak global demand and high production costs, any rise in raw material prices would reduce Bangladesh's competitiveness, they said.
The BGMEA and the BKMEA estimate that scrapping the bonded facility could raise production costs by 8-10 per cent, creating an additional burden of more than $2 billion a year for exporters.
Currently, the average cost of importing yarn from India is $2.55 per kg, while sourcing the same yarn locally costs at least $2.80 per kg.
Mill owners say they are still incurring losses at that price.
Indian yarn exporters reportedly receive benefits equivalent to around 30 cents per kg through export rebates, production-linked incentives, and energy subsidies, whereas Bangladesh has seen rising gas and electricity tariffs, higher bank lending rates, reduced access to low-interest loans, and lower cash incentives.
The government earlier reduced cash incentives in two phases, citing constraints that would follow Bangladesh's graduation from the least developed country (LDC) status.
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