Makers in tatters with increased production costs, reduced capacity

The entire manufacturing sector is now reeling under rolling power cuts as factories have to spend 10%-30% extra on meeting electricity supply shortfalls to keep their production lines up and running 24/7.

With no ability to bear the extra costs of generating electricity using furnace oil during scheduled power outages, many factories have been left with no other choice but to trim production in the span of 11 days since the countrywide power rationing came into effect on 19 July.

Industry people say the ongoing power supply disruption has put a new spoke in their wheel – they are already grappling with skyrocketing freight charges, disrupted supply chains, and soaring input costs driven by the Russia-Ukraine war.

To shed light on how manufacturers are struggling to deal with recurring power supply disruptions, take the example of ACI Limited, which has companies in 25 different sectors. The business entity has experienced a 5-10% hike in production costs in the last 10 days.

"We can continue production, although at higher costs, in factories where there are our own furnace oil-based power plants. But we see a fall in productivity in many manufacturing units with no such facilities," Dr FH Ansary, president of ACI Agribusiness, told The Business Standard. 

Industries outside Dhaka see power outages up to four times, he noted. 

The overall power supply to both households and industries has dropped around 12% or 2,000 megawatts, according to the Bangladesh Electrification Board. 

Speaking on condition of anonymity, an official of a leading business group said its manufacturing has decreased by at least 20% because of load shedding following a rise in production costs.

Mohammed Amirul Haque, managing director at Seacom Group's (a part of TK group), told TBS that it takes time to start operations of machines in cement, steel, edible oil, glass and paper factories. If such a production line is off once, it takes at least 30 minutes to restart.

As such, a single power outage causes a loss of time and production, he said.

"We see power cuts three-four times a day though it is scheduled for two times," he alleged, adding that their production has dropped 20%.

Pran-RFL, one of the leading manufacturers in the country, has around 23 factories that produce almost all consumer goods and garment items.

Kamruzzaman Kamal, director (Marketing) at Pran-RFL Group, said, "Our production is now being hampered because of the power outages, which will have a negative impact on our exports."

He has demanded that the government keep the industrial sector out of the purview of the rolling power outages. 

Akij Group is also bearing the brunt of the scheduled load shedding. 

Mentioning a 25%-30% hike in its production cost, an Akij Group official, not wishing to be named, said, "If such power supply shortages continue this way, we will be plunged into deep trouble." 

Apparel sector facing tougher time 

Arshad Jamal Dipu, chairman of Tusuka Group, said, "We are going through a tougher time than what we experienced in pandemic times. Many manufacturers are facing challenges in running factories at full capacity owing to power supply shortages.

Abdullah Hil Rakib, managing director of TEAM Group said, "Our production plants are facing setbacks due to the unstable power supply, which will also make on-time shipments difficult."

"We are trying to get an extension to shipment deadlines. Some goods have to be shipped through air freight," he also said.

"In some cases, buyers are asking for discounts, which will be a loss for manufacturers," said Abdullah Hil Rakib, who is also a director of BGMEA.

To cope with the ongoing power shortage, they are also trying to continue production by running diesel-run generators on a limited scale, he added.

The additional cost is pushing production costs up, which may hurt their competitiveness in the global market, he pointed out.

The factories are facing a shortage of gas supply. Seeking anonymity, a Narayanganj-based leading spinning mill owner told TBS that his mill needs gas pressure at 15 PSI (pounds per square inch), but the pressure has been hovering between 1.8 PSI and 3.2 PSI since the Eid vacation was over.

As a result, he has been forced to halt production. 

Double trouble for steel, ceramic factories 

Steel and ceramic factories are now facing a double whammy of gas and electricity crisis.

Great Wall Ceramic Industries Ltd, the country's largest tiles manufacturer, which has drastically reduced its production owing to low gas pressure, is now feeling the pinch of power outages. 

Md Shamsul Huda, vice-president at Bangladesh Ceramics Manufacturing and Exporters Association and managing director of Great Wall Ceramic, told The Business Standard, "We are running our factory on a single shift only owing to low gas pressure. The recurring power cuts have now put us in more trouble as production costs have also gone up by more than 20%."

Tapan Sen Gupta, Deputy Managing Director of BSRM Limited, told TBS, "We are getting a supply of 100 megawatts against demand for 150MW." 

The company's production cost has gone up by 30% to meet the supply deficit by generating power with furnace oil, he said, adding, "In this situation, we are running factories at a reduced capacity. We cannot say anything about the extent of losses right now."

Frozen and fast-food shops in cities and towns are feeling the heat of power outages. During load shedding, their customer footfalls remain also zero. Besides, a long power cut also leads to a degradation of such food products. 

The manager of Tamanna Fast Food in Moghbazar'sDilu Road said if there is load shedding, all sales remain stopped as the shop cannot run the juicer and microwave oven.

In the meantime, the scheduled power outages have slowed down the pace of all types of construction as equipment cannot be operated without electricity.

Engr Md Abdul Awal, managing director of Structural Engineers Ltd, said, "We are continuing to work by using diesel-run power generators during load shedding. That is why our costs are going up."

Those who do not have generators have to stop work, which is causing long-term losses for businesses, he noted.