Govt to lease out 17 jute mills to private sector

The government has decided to lease out 17 of the 25 state-owned jute mills to the private sector for five to twenty years, along with the possibility of extending this period at a later time.

To revive the sector, the Bangladesh Jute Mills Corporation on Wednesday floated an international tender so that local, foreign and partnership firms can participate in the bidding process, textile and jute ministry sources have said.

A lessee will be able use the jute mill premises to produce only jute goods, jute related goods and jute diversified products, and it will not be able to mortgage, sub-lease or rent out the leasehold property to any party including banks, financial institutions or intermediaries.

The government shut down all state-run jute mills on 1 July last year due to heavy losses and excessive production costs, and sent around 25,000 workers into retirement through golden handshake.

After the monthly coordination meeting held virtually on Wednesday, Textile and Jute Minister Golam Dastagir Gazi in a statement said, "Local and foreign entrepreneurs will get the opportunity to run BJMC's mills under a rent-based lease system through international tender.

"FDIs (foreign direct investments) will get priority in this regard."

BJMC jute mills at a glance

Before its liberation from Pakistan, Bangladesh had 75 jute mills. On 26 March 1972, The BJMC was formed through a presidential order to supervise, regulate and manage 78 mills – including private and abandoned mills, and those owned by the former East Pakistan Industrial Development Corporation.

The number of jute mills increased to 82 in 1981. After 1982, 35 mills became privatised, the government withdrew capital from eight and one mill merged with the Mymensingh Jute Mills. 

Eleven mills were shut down, sold or merged with other mills at different periods after 1993, including the Adamjee Jute Mills which was shut down in 2002. The BJMC later resumed production in two mills in 2011 and three in 2013, putting the number of operational mills at 32 during this period.

Among those, cases regarding five mills are underway in courts, while a project for producing Viscose [a semi-synthetic material used in clothes, upholstery and bedding] is being implemented in another.

Besides, proceedings of a case filed after the sale of a state-owned jute mill is presently underway.

Twenty-five jute mills under the BJMC were operational before the government shut them all down in July last year. The government has been paying the jute mill workers' dues with cash and savings certificates from last September.

In his recent statement, Textile and Jute Minister Golam Dastagir Gazi said, "We have paid the due wages of workers from four mills – Jatio, Khalishpur, Daulatpur and KFD. We have also decided to pay workers – who are entitled to Tk2 lakh or more – with 50% of the amount in cash and 50% in savings certificates."

BJMC data shows that there are seven jute mills in the Dhaka zone, and four among them will be leased out to private companies. These mills are – UMC Jute mills in Narsingdi, Bangladesh Jute mills in Ghorashal, Rajshahi Jute mills and Jatio Jute mills in Sirajganj.

There are ten mills in the Chattogram zone, and five among them will be leased out. Those are – Hafiz Jute mills, MM Jute mills, and RR Jute mills in Sitakunda, Gul Ahmed Jute Mills in Kumira and KFD Jute mills in Rangunia.

There are eight jute mills in the Khulna zone and all of these mills will be leased out. These mills are – Platinum Jubilee Jute mills, Crescent Jute mills, Eastern Jute mills, Khalishpur Jute mills, Daulatpur Jute mills, Star Jute mills, Jessore Jute industries Ltd and Carpeting Jute Mills Ltd.

These state-owned mills used to produce jute goods by processing raw jute. Before shutting down, they produced hessian fabric, CBC, blanket, ABC (GeoJute), jute yarn, clothes and diversified jute products. 

They also produced diversified jute goods such as file cover, fashion bag, school bag, ladies handbag, shaving kit, nursery pot, nursery seat, jute tape, cushion cover, curtains, colourful fabrics, rot-proof fabrics and rot-proof fabric bags.

BJMC Secretary AFM Ehteshamul Hoque told The Business Standard, "We are leasing out the jute mills to develop them further. Private sector entrepreneurs investing in the sector will bring new products, diversify the range and boost competition."

According to an unaudited financial statement, jute mills under the BJMC suffered Tk573.58 crore in losses in the 2018-19 Fiscal Year, and Tk497.18 crore in the 2017-18 FY. The financial statement for the 2019-20 FY was not available.

As per the 2018-19 FY statement, the state-owned jute mills have assets worth Tk25,352.46 crore, and such mills in the Chattogram zone hold the biggest assets. 

The amount of fixed assets – such as land, buildings, furniture, equipment and transport vehicles – owned by the jute mills is worth 14,329.98 crore. After factoring in retained losses, the amount of net fixed assets stands at 12,282.82 crore. 

The mills in Dhaka zone have the most amounts of net fixed assets.

State-owned mills also have long-term loans amounting to Tk8356.36 crore. The mills in Khulna have the largest amount of long-term loans. 

Moreover, the 17 mills – that are being leased out to the private companies – have 938.31 acres of land. Of this, 461.63 acres in Khulna zone, 253.27 acres in Dhaka zone and 223.21 acres are in Chattogram zone.

Lease conditions by BJMC

A firm will have to comply with a number of conditions before and after signing a lease with the BJMC. Firms with 100% local or foreign ownerships and foreign-domestic partnership companies can show Expression of Interest (EOI) in the lease process.

One individual or entity can submit tenders to take lease of more than one jute mill. After interested parties submit the necessary documents, the BJMC will conduct a 100-point evaluation on them.

After signing a lease agreement, the lessee shall display and operate under its own name without prejudice to the original ownership. The lessee has to pay monthly rent throughout the entire lease term.

The monthly rent shall be payable from the 10th month after the date of singing and shall be increased by 10% after five years. The lessor or government shall not take part in the operation of the mills under lease and shall not share profit or loss of this operation.

A successful bidder shall deposit an amount of money in cash equivalent to 24 months of rent as security of the lease. After signing the contract, within three months the lessee will take over demised premises.

The lessee shall operate the mills under its own name and style, carry out transactions through its own bank account and others related documents. 

The lessee may install new machinery of exiting machinery/equipment with the prior intimation to the lessor. And replacement of the old machinery by new one(s), the lessee shall handover the old machinery to the lessor.