How the fuel crisis is disrupting production and squeezing businesses

Bangladesh's fuel crisis is no longer only affecting transport and goods delivery, but is now disrupting factory operations and business cash flow.

Rising fuel prices, shortages of diesel and higher freight charges are increasing production costs across industries.

At the same time, weak consumer demand is making it harder for companies to recover those costs.

Crisis hits production cycle

The pressure is spreading across the full production cycle, from importing raw materials to manufacturing goods and delivering them to markets.

Businesses say higher fuel prices, rising freight charges and increased raw material costs are sharply pushing up expenses, while slower sales are limiting their ability to raise prices.

Masudur Rahman, deputy general manager (external affairs) at Safwan Bashundhara Global, said the impact of the Middle East crisis is pushing the group's paper and cement businesses towards a critical stage.

He said freight costs for importing raw materials have risen from $8 per tonne to $14 per tonne, while diesel shortages have left heavy factory equipment unable to operate.

"Because of the diesel crisis, our delivery capacity has dropped by about 50%. Where we used to receive Tk20 crore from the market daily, it has now fallen below Tk10 crore," he said.

Businesses say the fall in deliveries is directly affecting sales collections and weakening cash flow.

In some cases, production costs have increased by as much as 20%, but many companies are reluctant to raise prices because consumers are already under pressure.

As a result, profit margins are shrinking rapidly.

Demand is also weakening. As many of these goods are non-essential, consumers are cutting spending on items such as tissue and toiletries, creating further pressure on manufacturers.