Buy local yarn, textile millers urge garment makers to ease pressure on reserves

The Bangladesh Textile Mills Association (BTMA) has urged woven and knit garment makers to open back-to-back letters of credit (LCs) and purchase yarn from the local market in order to avoid the stockpile of unsold yarn and save US dollars.

In order to help them deal with the problem brought on by the unsold yarn, the textile millers also urged that the government increase the Export Development Fund (EDF) allocation from $20 million to $30 million.

Mohammad Ali Khokon, president of the organisation, placed the demands at a press conference at the BTMA office in Dhaka yesterday.

The textile industry insiders said the country's apparel makers are receiving low export orders due to the ongoing global economic crisis, which has created a low demand for yarn. Amid the situation, the government hiked gas price up to 178% for industries, which lost their competitiveness.

That is why apparel makers are importing yarn to keep competitiveness as the yarn is cheaper than local millers' price, though Bangladesh's textile sector has enough capacity to meet knitwear sector's yarn demand and the country is also facing a severe forex reserve crisis.

According to the BTMA, 2,71,783 tonnes of yarn local textile millers exported in the January-April period this year were valued at Tk9,643 crore, which was 4,00,923 tonnes valued at Tk15,992 crore in the same tenure of 2022. During the period, Bangladesh imported 2,75,143 tonnes of yarn for Tk10,616 crore; it was 4,60,168 tonnes in April last year for Tk17,436 crore. 

In April, local textile millers sold per kg of yarn at $3.1, which was $4.85 in the same month last year, data shows.

Zubair Spinning Mills, a sister concern of Noman Group, Managing Director Abdullah Zubair told The Business Post that their monthly gas bill rose by Tk30 crore to Tk68 crore after the recent price hike.

Zubair said, "If the price is not reduced, our annual gas bill will rise by at least Tk350 crore, and we cannot make profit. How will we survive?"

Due to the gas price hike, our yarn and fabrics production cost has also increased, which has impacted our exports. Now we have yarn and fabrics worth millions in our stocks," he added.

Mosharaf Textile's Chairman Md Mosharaf Hossain said, "We paid an additional gas bill as the government hiked its price, which increased yarn price up to 30%. But the gas pressure situation is still unchanged. On the other hand, due to the high price of yarn, we lost competitiveness.

"That is why apparel manufacturers are importing yarn at cheaper price – although we lost foreign currency due our imports. Now most of the millers have large stocks of yarn in their warehouses."

The BTMA president said the central bank reduced the EDF from $7 billion to $4.5 billion and also cut an individual's borrowing limit for the textile sector from $30 million to $20 million. 

"The move came at a time when we are in a severe crisis, and the factory millers are highly dependent on the funds. Although the central bank issued another Tk10,000 crore fund for exporters to purchase raw materials, it is not helpful for exporters."

Khokon said fabrics and clothes worth millions of dollars enter Bangladesh from the neighbouring country and Pakistan every year through illegal channels, which also threaten the local market-based textile millers.

"We are not only suffering from the illegal cross-border trading, the government is also losing a large amount of revenue. I urge the authorities to take proper initiatives to protect illegal clothes and fabrics trading," he added.