BKMEA demands government to reevaluate depreciation rate

Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) has demanded that the government should increase the limit of wastage rate in apparel production.

"The order set a depreciation rate of 27% for basic knit items, 30% for special items and 4% for sweaters and socks, which cannot be considered realistic under any circumstances," says BKMEA Vice President Mohammad Hatem.

A letter was sent from BKMEA to the commerce ministry in this regard yesterday (20 December).

In the letter, BKMEA Vice President Mohammad Hatem said, "At the request of the concerned trade organisations including BKMEA and Bangladesh Garment Manufacturers and Exporters Association (BGMEA), a committee was constituted by the Ministry of Commerce to determine the rate of depreciation." 

"The committee also visited several garment factories and collected written opinions from some of them.

In the case of knit garments, multiple meetings were held with the commerce minister and the secretary, to redefine the depreciation rate from yarn to fabric and from fabric to garment. 

In the meeting, stakeholders concerned presented detailed data on the depreciation rate with practical explanations. Sadly, the reevaluation of the depreciation rates through order "ka" issued by the Ministry of Commerce did not reflect it," added the letter.

The letter further stated that at the same time, there is a discrepancy between differentiating the basic knit and the special items, which in reality needs to be divided according to product types and fabric types.

In keeping with modern fashion, the depreciation rate of dyeing and finishing in the production of basic net items should be at least 12% but in the issued order this rate is only 9%. Therefore, considering it as 12%, it is necessary to fix the depreciation rate of basic items at 30% (i.e. knitting and dyeing 13% and from cutting to shipment 17%).

The depreciation rate of dyeing and finishing in the production of fabrics used for making special items needs to be increased from 9% to a minimum of 14%, meaning that the total depreciation rate for making special items will be 35% (i.e knitting and dyeing 16% and from cutting to shipment 19%). Special items do not include special fabrics like yarn dye, fleece/brushing, all over print etc.

The letter also reads that no sweater factory has been inspected by the committee so far but the rate of depreciation of sweaters and socks has been fixed at 4%, which is completely unreasonable. The rate in sweater production is usually more than 12%.

"In particular, the order does not provide clear instructions on the application of depreciation rate to those organisations whose audit activities are still pending or in process. As a result, exporters will face financial losses and embarrassment, which will hamper normal export activities," concludes the letter.