‘We are dying’: Adverse policies drive most textile millers to edge, say industry leaders

Adverse policies, initiated during the previous government's tenure and continued by the interim government, have gradually pushed the country's textile entrepreneurs into crisis, industry leaders said, claiming that nearly 90% of textile mill owners are seeking ways to exit the industry.

At a press briefing held in the capital's Gulshan Club today (5 July), Bangladesh Textile Mills Association (BTMA) Vice President Abdullah Al Mamun said, "The price of gas has increased abnormally, yet there is inadequate supply. Export incentives have dropped steadily to just 1%, which was once 25%. Banks are also short of funds. With the new 2% advance income tax (AIT) on cotton imports, this industry will no longer survive."

"Around 90% of textile mill owners are running at a loss; they want to sell their factories and exit the industry," he added. "We are dying."

At the press conference, the organisation demanded an immediate reduction in the new AIT, VAT, and corporate tax.

After the conference, a senior BTMA official, speaking to TBS on condition of anonymity, said, "Efforts are underway to sell at least 50 textile mills."

Confirming this, BTMA Director Khorshed Alam told TBS the number is likely to be over 50. "I want to sell one of my two spinning mills located in Narayanganj. After that, I also intend to sell the other."

The BTMA comprises around 1,800 textile mills, over 500 of which are spinning mills. 

Explaining, Khorshed Alam said, "Costs were already high. With the new taxes, we now have to sell yarn at prices below production costs. It won't be possible to survive in the long run."

"Currently, yarn is being sold at a loss of Tk4 per kg," the BTMA director added.

In the FY26 budget, the government raised the corporate tax for the textile sector from 15% to 27.5%, imposed a 2% AIT on cotton import prices, and increased the VAT on yarn sales to local weaving mills (not for export) from Tk3 per kg to Tk5 per kg.

The new VAT took effect on the day the budget was announced, while the new taxes came into force on 1 July, the beginning of the new fiscal year.

Due to the sudden large tax amounts, cotton importers have temporarily stopped clearing cotton consignments from the ports.

At the press conference, BTMA Vice President Abdullah Al Mamun said, "If the government does not reverse this [tax hike] decision by Monday [7 July], it will backfire, and the revenue target from this sector will not be met."

The AIT, which applies to imports of raw materials like cotton and man-made fibres, is technically adjustable according to the revenue authorities.

National Board of Revenue (NBR) Chairman Abdur Rahman Khan earlier told TBS, "If excess tax has been paid by the end of the year after calculation, there is an opportunity to adjust it later."

Another NBR official, speaking to TBS on condition of anonymity, said, "If the profit is less than the payable AIT, the taxpayer will not get a refund. However, if there is profit in a subsequent year, there is an opportunity to adjust it then."

However, BTMA Vice President Mamun questioned the practicality of this, saying, "Once money enters the government's account, there's no precedent of getting it back."

At least three other textile entrepreneurs have expressed the same concern. They said there is no precedent for getting tax money refunded once it goes to the government.

In this situation, they said, paying the new tax would require taking fresh loans from banks.

BTMA Vice President Saleudh Zaman Khan echoed these concerns, accusing vested interests of trying to dismantle the textile industry. "This is nothing short of a deliberate attempt to destroy the country's textile sector."

He further warned that although the current corporate tax rate for textile mills is 27.5%, with the new tax, it could rise to as high as 59%, making the industry less competitive compared to regional peers.

Explaining how the new tax will increase losses for factories, Saleudh Zaman said that a textile mill with a production capacity of 750 tonnes per month currently pays Tk3.18 crore annually as 1% tax on sales. Due to the new 2% advance income tax (AIT), this amount will rise to Tk8.19 crore.

This means an additional burden of Tk4.7 crore on a single factory, which will effectively raise the tax rate from the official 27.5% to 59%, he added.

BTMA President Showkat Aziz Russell, who owns a spinning and a denim factory, said the added costs will compel him to import yarn from India rather than buy from local mills. "In today's situation, my denim factory cannot afford to source yarn locally anymore," he added.

"No domestic textile mill can survive under such a policy," claimed Russell.

He called on the government to immediately reconsider and reverse the tax and VAT decisions. "If not, the consequences will be irreversible," he said.

Additionally, the new tax, coupled with additional VAT burdens and reduced export incentives, comes at a time when mills are already grappling with a severe gas and electricity crisis.

'If textile mills shut down, garments will follow'

At the press conference, BTMA leaders warned that if textile mills are forced to shut down, the garments sector will collapse within a year. They also cautioned that the banking and insurance sectors would be severely affected.

Khorshed Alam said that out of the $23 billion currently invested in the textile sector, $18 billion came through bank loans.

Badsha Mia, managing director of Badsha Group of Industries and a leading textile entrepreneur in the country, said, "We don't have a level playing field with neighbouring countries. In India, entrepreneurs are given incentives of about Tk20 per kg. So they can offer yarn for export at a discount of up to Tk16 per kg."

"Our interest rates have doubled, gas prices have tripled, the dollar has jumped from Tk80 to Tk122, and now there's additional tax pressure," he added.

"Many factories are on the verge of shutting down. The government should look into it," Badsha Mia said, describing the current situation as a pre-planned effort to cripple the country's industry.

Razeeb Haider, managing director of Outpace Spinning Mills Ltd, added, "The newly imposed 2% AIT is the final nail in the coffin for our textile sector."

Several trade associations — including the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) and the Bangladesh Terry Towel and Linen Manufacturers and Exporters Association — also expressed their support for BTMA's demands at the press conference.