Govt moves to scrap duty-free yarn imports to protect local spinners

In a significant policy shift aimed at safeguarding the domestic spinning industry, the government is moving to scrap a decades-old duty-free import facility for yarn, a move that could see import taxes on the raw material surge to approximately 37%.

The commerce ministry formally requested the National Board of Revenue (NBR) on 12 January to suspend tariff-free imports under the bonded warehouse facility – an incentive in place since the 1980s – indefinitely. While the NBR is yet to implement the directive as of 18 January, the proposal has already created a sharp divide between local textile millers and export-oriented garment manufacturers.

A lifeline for local spinners

Local textile mill owners, who have invested an estimated $23 billion in the sector, argue that the move is essential for survival. According to the Bangladesh Textile Mills Association (BTMA), nearly 100 mills have already partially or fully closed due to a lack of demand.

"This decision provides a chance for our industry to survive," said Saleudh Zaman Khan Jitu, managing director of NZ Apparels Limited. He noted that Indian exporters have been selling yarn in Bangladesh at $0.30 per kilogram cheaper than their own domestic rates, thanks to various Indian government subsidies.

Fazlul Hoque, managing director of Israq Spinning Mills Limited, highlighted the severity of the crisis: "We currently have a stockpile of 3,000 tonnes of yarn, whereas our normal inventory is around 700 tonnes. Restricting imports will finally allow us to clear this stock."

Bangladesh earns about 85% of its export revenue from the readymade garment sector, with knitwear accounting for roughly 54% of total garment exports. Knitwear production relies heavily on 10-30 count yarn – the very category for which import restrictions have been sought.

According to Export Promotion Bureau data, Bangladesh imported yarn worth Tk26,700 crore (around $2.22 billion) in the 2024-25 fiscal year. Industry insiders say nearly 90% of imported yarn comes from India, where exporters allegedly benefit from government subsidies that allow them to sell yarn in Bangladesh at prices about $0.30 per kg lower than in their own domestic market.

The BTMA says the surge in duty-free imports has severely hurt local producers. Speaking at a recent press conference, BTMA President Showkat Aziz Russell said nearly 100 textile mills had already shut down partially or fully due to declining orders.

In its letter to the NBR, the commerce ministry argued that bonded imports of yarn had increased sharply over the past two years, drastically reducing sales of locally produced yarn and causing heavy financial losses. The letter warned that if the trend continues, more spinning mills will face closure, increasing import dependence, lengthening lead times, reducing local value addition and putting pressure on foreign exchange reserves.

RMG leaders raise concerns

However, the apparel sector – the backbone of Bangladesh's exports – has reacted with alarm. The Bangladesh Garment Manufacturers and Exporters Association (BGMEA) and the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) warn that the move could be "suicidal."

Fazlee Shamim Ehsan, executive president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), alleged that some local yarn producers had already begun exerting pressure by delaying proforma invoices.

Industry leaders estimate that if duty-free imports are halted, the price of yarn could rise by approximately 10%, jumping from the current $2.55-$2.60 per kilogram to as much as $2.85.

"Our export competitiveness is at stake," said Md Shehabudduza Chowdhury, vice president of BGMEA. "Global demand for clothing has dropped by 15%, and exports have been declining for five months. We cannot pass these increased production costs on to international buyers."

The BGMEA and the BKMEA yesterday called a press conference for today to highlight their position.

Yarn price may rise by 10%

Currently, locally produced yarn sells for $2.70–2.75 per kg, compared with $2.55–2.60 for imported Indian yarn. Industry estimates suggest prices could rise by about 10% to $2.80–2.85 per kg if import restrictions are enforced.