Lease term, loan settlement emerge as challenges over Savar Tannery shift to Bepza
The barriers include the lease term of land under the Bepza, how the loans taken from various banks and financial institutions during the Bscic period be settled, and how new charges are determined for the operation of the Central Effluent Treatment Plant (CETP)
Highlights:
- Management transfer to Bepza faces lease, loan, and compliance hurdles
- Tannery owners carry massive debts from Bscic-era borrowing
- Owners demand loan rescheduling and interest waivers before handover
- CETP capacity, staffing, and waste management remain inadequate
- Bepza leasing terms and higher CETP charges raise viability concerns
- Government committee submitted roadmap; final decision pending ministries
Lease term and settling loans have emerged as challenges centring the shifting the authority of Savar Tannery Industrial Estate to the Bangladesh Export Processing Zones Authority (Bepza) from the Bangladesh Small and Cottage Industries Corporation (Bscic) over compliance.
The barriers include the lease term of land under the Bepza, how the loans taken from various banks and financial institutions during the Bscic period be settled, and how new charges are determined for the operation of the Central Effluent Treatment Plant (CETP).
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Stakeholders involved in the industry said that several tannery owners in Savar have huge outstanding debts, amounting one thousand to one and a half thousand crore taka.
Before handing over to the industrial park Bepza, the tannery owners demanded special rescheduling benefits, including waiver of interest on these loans.
Ashik Chowdhury, executive chairman of Bangladesh Economic Zones Authority (Beza) and the Bangladesh Investment Development Authority (Bida), told The Business Standard, "A roadmap for the Savar Leather Industrial City has been prepared and submitted to the Ministry of Industries after discussions with stakeholders. Now, the Ministry of Industries will make the final decision on this matter."
Recently, the high-powered committee, formed by the government to prepare a roadmap regarding the control of the industrial park, has submitted a report with some recommendations.
The Savar Industrial Park was developed on 199.40 acres of land as part of a government initiative to relocate tanneries from Hazaribagh and curb environmental pollution, setting up a CETP on 17.30-acre of land with sewage treatment plants and dumping yards to treat 25,000 cubic metres of waste.
The construction work of the project was scheduled to be completed in 2005 after beginning two years back. However, the deadline was extended 12 times, and costs increased from Tk175 crore to Tk1,015 crore before it was formally completed in 2021.
According to sources at the government-formed committee, the CETP has been unable to treat more than 15,000 cubic metres of effluent per day due to shortages of skilled personnel and technical expertise. Solid waste management is another major concern, with large volumes of leather waste contributing to environmental pollution and loss of potential economic value.
To address these issues, the committee headed by Major General (retd) Md Nazrul Islam, executive member of Bepza, was formed in August last year.
Speaking to TBS, he said the most critical issue is the heavy debt burden on tannery units as many operators borrowed heavily but failed to achieve viable production, raising difficult questions about how the government should deal with liabilities of non-operational units.
Highlighting the importance of a strong and effective management structure, he said that a strong body is badly needed to govern such the estate.
Acknowledging complexities in completing the process, a committee member said balancing the interests of tannery owners, finished leather producers, and regulatory bodies are challenging, particularly given the unresolved debt and liability issues.
Leather Development Forum (LDF) Coordinator Taherul Islam said the Bepza management could significantly increase effluent treatment costs, potentially raising CETP charges from the current Tk40–60 per cubic metre to more than Tk200 per cubic metre.
Such an increase, he warned, would be commercially unviable for most tannery operators and highlighted legal complications arising from differences in land-leasing policies.
While Bscic provides 99-year lease deeds, Bepza generally offers 30-year rental agreements, which could create contractual and legal hurdles during any transition, he said.
Ferdaus Ara Begum, chief executive officer of Business Initiative Leading Development (BUILD), described the process as a positive step, citing Bepza's track record in managing export processing zones in Dhaka, Cumilla, and other regions.
She said Bepza is widely regarded as one of Bangladesh's most successful institutions, particularly in operating CETPs, and its experience could improve effluent management at Savar.
However, the BUILD chief executive cautioned that several structural and contractual issues need to be resolved.
Bscic Chairman Md Saiful Islam said the estate will be governed according to government decisions based on the committee's recommendations.
Md. Shakawat Ullah, senior vice chairman of the Bangladesh Tanners Association (BTA), told TBS that tannery owners have taken a 99-year lease from the BSCIC to construct facilities, and currently, about 141 units are in production there.
"During a discussion with us, it was informed that the industrial city will be considered a specialised industrial area and the industrial units will operate under the existing rules and regulations of Bscic. However, matters such as CETP and waste management may be handled through separate arrangements, for which a prescribed fee will be collected from the industrial owners," he claimed.
With the transfer of management, clarity is needed on whether this supply system, NBR-related issues, he said.
Regarding the loan-related challenges, Shakwat said that since 2017, many tannery owners have been unable to run their businesses normally, causing a huge burden of loans and interest.
He said that these issues have also been included in the set of recommendations and that later, discussions with the Ministry of Finance could be held to find solutions.
