Banks denying loans to textile sector: Millers

Textile millers have come down heavily on banks for not lending to them at a time when they most need the money.

Around 900 mills that do businesses on the local market are being denied bank loans under the stimulus packages. 

"Banks are not conforming to the Bangladesh Bank's directives," said Mohammad Ali Khokon, president of Bangladesh Textile Mills Association (BTMA) at a webinar, organised by The Business Standard on Saturday.

He questioned how the banks expect a textile mill to score a minimum of 60 percent on a credit rating at a time when they are sitting on stocks and credit sales plus are running at almost half of their capacities.

More than three months have passed since Covid-19 hit and the government's subsequent announcement that stimulus packages would help businesses offset the novel coronavirus shock that has disrupted raw materials sourcing for production, distribution and, above all, consumption. 

However, more than 95 percent of BTMA's nearly 1,500 member mills have yet to get loans under the stimulus packages, he said.

The BTMA president said the sector's total losses could be as high as $10 billion.

Kutubuddin Ahmed, chairman of Envoy Textiles and Shahid Alam, vice-chairman of Jalal Ahmed Spinning Mills and a director of BTMA also took part in the discussion, moderated by Sajjadur Rahman, deputy editor of The Business Standard.

The discussants said that they expected some policy support – such as the relaxation of utility bill payments, exchange rate support and quick service at ports and customs – but they did not get it despite repeated requests, they alleged. 

Moreover, there are tax issues that may further deter the sector's bounce back from the ongoing crisis, they noted.

The textile sector, which has been playing a pivotal role by supplying input – fabric, yarn, washing, dyeing, etc. – to garment makers for years, is now in a situation that has worried many millers about their survival. 

"Surviving till December this year has become a big challenge for us," said Kutubuddin Ahmed of Envoy Textile, a Tk2,200 crore project.

He said they need money more now than at any time before, but they are not getting it.

Like the BTMA president, he also blamed the banks for not cooperating with textile millers enough at this unprecedented time.

Kutubuddin lost Tk43 lakh due to a fault of a bank that had failed to send documents to the port and other related parties on time during the shutdown period. 

He also mentioned that the central bank has so far played a proactive role, but in most cases, private banks have not responded as much as businesses need.

Gas and electricity bills have now become another burden on the textile mills when millers are witnessing a 40 percent slump in sales and production.

Kutubuddin said Envoy has to pay over six crore taka a month in gas and electricity bills, and they have requested the government authorities concerned give them extra time to pay the bills, but that has not happened yet.

The BTMA president alleged, "We have urged the government to allow us delayed payment of gas and electricity bills, not a waiver. But they have not allowed us to do so, and in some cases, the authorities have severed connections."

Mohammad Ali said the local market size of textiles amounts to about eight billion dollars, riding on demand during four festivals – two Eids, Pahela Baishakh and Durga Puja. 

Unfortunately, they have not been able to do any business this year due to the Covid-19 crisis, he said.

Shahid Alam, vice-chairman of Jalal Ahmed Spinning Mills which does business on the local market, said they have fallen victim to circumstance. 

Around 900 mills – spinning, weaving, washing, and dyeing – engaged in the local market, had been growing rapidly on the back of Bangladesh's high economic growth and consumers' purchasing power.

"We have already missed the two biggest festivals for clothing sales. We are likely to miss the other two – Eid-ul-Adha and Durga Puja," he said.

As this year's Pahela Baishakh was during the lockdown period, businesses could not collect money against their year-long sales, he said.

"Banks are denying us loans from the stimulus packages. Nobody is looking at us," Shahid, also a director of BTMA, added.

The local textile industry is also facing unequal competition with imported low-cost fabric and yarn, he said. 

They also discussed some tax issues which came into effect on July 1.

The BTMA president praised the government for reducing Value Added Tax (VAT) on local yarn. But a hike in VAT on polyester fibre is contradictory to the government's vision of diversifying products, he added.

A 10 percent cash incentive instead of four percent, VAT waiver on local utility bills and a reduction in the VAT rate to two percent from six percent on polyester fibre would be helpful for the survival of the industry, Mohammad Ali said.

Kutubuddin of Envoy Textile said the government has doubled source tax to 0.5 percent this year, from 0.25 percent in the previous year, at a time when exports are decreasing.

Textile millers also demand that the government devalue local currency in line with many of Bangladesh's competitor countries in apparel exports.