Cash incentives or bond suspension – govt weighs options to boost local yarn use

The government is considering either offering cash incentives for the use of locally produced yarn or temporarily suspending bonded import facilities to help ease the ongoing crisis in the country's spinning and textile mills.

The policy alternatives were discussed during a meeting in the capital yesterday (29 January), chaired by the Commerce Adviser and attended by leaders from the readymade garment (RMG) and textile sectors. 

While the commerce ministry is exploring several relief measures, a final decision is expected to be reached on 3 February following a meeting with the finance adviser, officials told TBS.

Mahbubur Rahman, secretary of the commerce ministry, said, "We are considering incentives for local yarn use or temporarily withdrawing bonded facilities for imports. Another alternative is also under review. One of these options may be implemented after the meeting with the finance division on 3 February." 

He added that both the garments and textile sectors are critical for the economy and any decision must protect their interests.

Spinners postpone shutdown

Following assurances of the government's positive stance, the Bangladesh Textile Mills Association has postponed its decision to shut down textile mills from 1 February. 

In a statement yesterday, the association said, "In view of the government's assurances and the constructive progress of discussions, and considering the broader national context, including the upcoming national election and referendum, the BTMA has decided to temporarily suspend its previously announced programme to shut down all textile mills from 1 February 2026."

It added, "The commerce adviser acknowledged the validity of the concerns raised by industry stakeholders and underscored the strategic importance of the spinning sector in Bangladesh's export competitiveness and industrial value chain."

Industry representatives noted that a cash incentive scheme of up to Tk5,000 crore was discussed, though funding constraints currently limit implementation. An alternative proposal involves reallocating the existing 0.30% cash incentive given to the readymade garment sector to support local yarn usage. 

Experts estimate that the annual allocation of around Tk2,000 crore for this incentive could be supplemented to offer targeted rewards for local yarn consumption.

RMG exporters oppose removal of bonded facilities

However, garment exporters have opposed the removal of bonded facilities, warning that such a move would increase production costs and hinder the competitiveness of Bangladesh's $40 billion apparel export industry. 

Fazlee Shamim Ehsan, executive president of the Bangladesh Knitwear Manufacturers and Exporters Association, said, "The government should provide incentives to support the textile sector, but the raw material supply chain must not be disrupted."

Earlier, on 12 January, the commerce ministry recommended to the National Board of Revenue that bonded facilities for yarn imports be withdrawn. The proposal prompted strong objections from exporters, as it would subject imported yarn to nearly 37% duty, significantly raising input costs. Following the backlash, the government postponed implementation of the measure.