How state-owned Gazi Wires sinks into losses due to reliance on govt procurement

State-owned copper wire manufacturer Gazi Wires Limited is suffering mounting losses due to its continued dependence on government procurement, particularly from the Bangladesh Rural Electrification Board (BREB), which has not purchased any wires from the company for the past four years.

Once the country's sole producer of copper wire, Gazi Wires used to supply 500-600 tonnes of wires annually to the BREB. Based on its demand, the company expanded its production capacity from 500 to 2,020 tonnes at a cost of Tk65 crore. 

According to the company's annual financial statements, it made profits of Tk11.98 crore, Tk15.88 crore, Tk16.43 crore, Tk8.83 crore, Tk8.26 crore, and Tk1.25 crore in FY15 to FY20, respectively. 

However, citing high prices, the BREB has ceased purchasing from Gazi Wires since FY21. As a result, the company has plunged into financial losses. It posted a loss of Tk5.63 crore in FY24, with losses amounting to Tk5.41 crore by April in the just-concluded FY25.

According to Gazi Wires Acting Managing Director Md Abdul Halim, "The import cost of raw materials stands at around Tk1,400 per kg, and we sell at Tk1,860. In contrast, local private companies sell at around Tk1,665, and an Indian competitor offers at Tk1,930. However, BREB claims they can purchase at Tk1,200 per kg."

He added, "We produce from virgin raw materials, unlike many market players who use scrap, which allows them to offer lower prices. Our products are far more durable than those made from scrap."

Marketing strategy woes and bureaucracy

Speaking to TBS, Professor Mohammad Tayeb Chowdhury, dean of the Faculty of Business Administration at the University of Chattogram, highlighted the broader issue: "Many government institutions are drowning in losses despite producing higher quality products due to a lack of effective marketing policies and strategies. 

"In today's competitive market, businesses need to reach customers through corporate relationship building and various marketing tactics. State-owned entities face bureaucratic complexities, and with salaries maintained despite losses, there's often no urgency. There's also no dedicated budget for this sector. The government should rethink its approach for Gazi Wires and all other state-owned enterprises."

Professor Moinul Islam, a renowned economist, said, "Sometimes, commissions or bribes are involved when purchasing from private entities instead of state-owned ones. This could be another reason why one government entity might not buy from another."

Establishment and current state

Gazi Wires, a state-owned enterprise under the Bangladesh Steel and Engineering Corporation (BSEC) within the Ministry of Industries, was established in 1965 in Chattogram's Kalurghat heavy industrial area. It began as a private venture with the collaboration of Japan's Furukawa Electric Company. 

In 1972, it was nationalised and merged with the BSEC, later becoming an affiliated institution. Since its inception, the company has operated to meet the demands of the power and energy ministry, with an annual production capacity of 500 tonnes. 

Currently, Gazi Wires produces three types of wire: Super Enamelled Copper Wire (gauges 12 to 46), Annealed Copper Wire (gauges 10 to 46), and Hard Drawn Bare Copper Wire (gauges 1 to 46). Super Enamelled Copper Wire accounts for the majority of its sales and production. 

The company employs 128 employees, including officers and labourers. To break even, the company needs to produce 800 tonnes of wire. However, in FY24, it produced only 267 tonnes, and in FY25 (as of April), a mere 87 tonnes. The production cost per kilogram ranges from approximately Tk1,600 to Tk1,800.

 Industry experts note that the primary demand for copper in Bangladesh is for various grades of wire, used in transformers, motors, fans, coils of various equipment, electric fans, and other electrical products and machinery. The domestic copper wire market is estimated at approximately 3,000 tonnes annually. 

Besides Gazi Wires, several other companies, including BRB Cables and Super Shine, produce copper wire in Bangladesh. Super Enamelled Copper Wire is mainly used in the coils of various capacity transformers and motors for the Rural Electrification Board, BPDB, DESCO, BJMC, and the Barind Multipurpose Development Authority in the northern region. 

Additionally, various fan, AC, and other electric product manufacturing factories in Bangladesh purchase copper wire from Gazi Wires.

Rising copper demand

Globally, the demand for copper, an essential metal in renewable energy, is surging as the world focuses on increasing the use of renewable energy sources to combat climate change. However, global supply shortages are preventing this demand from being met. Market insiders believe that global copper prices could increase by over 75% within two years due to the growing gap between supply and demand.

In a forecast issued in December 2023, BMI, the research unit of market analysis firm Fitch Solutions, stated that ambitious renewable energy targets could create an additional 4.2 million tonnes of copper demand worldwide by 2030, potentially leading to a record price increase.

Expressing optimism, Md Abdul Halim said, "BREB officials inspected the Gazi Wires factory on 22 May and were satisfied with the product quality. The industries ministry is communicating with the power and energy ministry, and we expect a quick resolution to the problem."

He added, "Buyers in Chattogram are purchasing our products. Dhaka has a vast market, and we plan to contact large private companies there starting this month."