Relocation of tanneries from the city's Hazaribag to Savar will be delayed, if the country's current political volatility continues.
Industry insiders opine that tanners cannot bear the cost of relocation at this moment, as the present political stalemate has almost paralyzed their business.
Tannery owners are seeking around Tk 7.5 billion term loan at a low interest rate for the process, but yet to get any positive response.
They recently met Bangladesh Bank Governor Dr. Atiur Rahman, seeking his help in this regard.
"We cannot even give salary to our workers regularly. How can we spend a substantial amount for relocation purpose?," President of Bangladesh Finished Leather, Leather Goods & Footwear Exporters Association (BFLLFEA) Mohammad Abu Taher told The Financial Express (FE) Friday.
The tanners are trying to explore other local and international financial sources for loan, including International Finance Corporation (IFC).
"Tanneries are supposed to be shifted to Savar Tannery Estate by the end of this year. But their owners will not take the necessary initiatives for relocation, if the current volatile politics persists," Shamsul Huda, former president of Bangladesh Tanners Association (BTA), told FE.
"We need long-term loans with lower interest rate for the relocation. We can't bear all costs of the process. If we do it, we can't run our business."
"We met the central bank governor. He did not give us any assurance. But he said he will try to find out a solution for us," he concluded.
Last October, the government and the tanners signed a memorandum of understanding (MoU) to ensure the relocation of Hazaribag tanneries to Savar Tannery Estate.
According to the MoU, the government has decided to provide Tk 2.5 billion as compensation to the tanners for the process, and bear Tk 6.63 billion or 80 per cent of the total project cost.
However, the owners will have to pay the remaining 20 per cent or Tk 1.65 billion in installments.
Abu Taher said the tanners may get half of the compensation of Tk 2.5 billion before the relocation, though it is not resolved yet.
"The compensation is very poor. Tk 2.5 billion was promised 10 years ago, now the amount is not enough."
He said the tanners are also worried about the European Union (EU) warning.
The EU warned that they would stop importing leather goods from Bangladesh, if the tanneries do not start production in a healthy environment by 2014.
According to the first MoU, signed in 2003, the government would bear the cost of setting up of the central effluent treatment plant (CETP) and pay Tk 2.5 billion as compensation to the tanners for relocation.
But, according to another MoU, signed in 2007 between the two parties, the government would construct the CETP. But its cost would be paid by the tanners in installments in 15 years.
In the meantime, the cost of the CETP and other expenses have increased many times. So the tanners are demanding a new agreement.
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