Govt jute mills likely to go private by 2021

The government is going to lease state-owned jute mills to the private sector to revive the jute industry and the process is expected to be completed by this year, industry people say. 

They hope the move will revive the jute mills mired in debt and losses.

All 26 jute mills are now closed and 17 of them will be leased. 

Apart from local entrepreneurs, two Indian companies and one from the UK, have submitted lease applications. All told, 24 companies have submitted 59 tenders for the lease of 14 mills. 

No application was received for three mills in Khulna.

The Bangladesh Jute Mills Corporation (BJMC) will seek final proposals from the shortlisted organisations after scrutinising their applications.

The BJMC Secretary and member of the lease proposal opening committee, AFM Ehteshamul Hoque, said they were trying to complete the lease out by this year so that the closed mills can be reopened as soon as possible. 

He said this would help create jobs.  

As per the government's decision, the BJMC jute mills were closed in July last year.

The government now wants to lease the mills as per the Industrial Enterprise Nationalisation Act 2018. 

BJMC officials say the jute mills were facing losses long before their closure and debt had also been rising due to outdated machinery, poor maintenance, and no diversification of products. 

They say leasing the mills to the private sector will increase the production of jute goods and diversified jute products, and exports will also rise.

Requesting anonymity, a BJMC general manager said the jute mills have a large amount of fixed assets and they are occupying a lot of space that remains unused. 

He said reopening the jute mills would create jobs for the 25,000 workers whom the government offered a golden handshake after the mills closed.

Jute, known as the golden fibre of Bangladesh, was a major export item in the 80s before the advent of the readymade garment industry.

Exports of jute and jute goods fetched $1.16 billion in fiscal year 2020-21.

Lease period 5-20 years 

Sources say the government will lease the jute mills for five to 20 years and there will be options to extend it further later.

As per the terms of the lease, the lessees will manage the mills' infrastructure, equipment, and land, and run the facilities under their own management. 

They will only be allowed to produce jute goods and diversified jute products on the jute mill lands.

The leasehold property or any part of it cannot be mortgaged or sub-leased or rented to any party, including banks or financial institutions, or intermediaries.

In April this year, the BJMC invited international tenders to privatise government jute mills and interested parties finished submitting their applications on 15 June. The lease proposal opening committee held its first meeting on 17 June.

According to meeting sources, the highest number of applications was submitted for Bangladesh Jute Mills, with 11 companies applying for its lease. It was established in 1962 in Narsingdi on  77 acres.

Foreign firms interested in lease 

Mohan Jute and Pacific Jute of India and the Jute Republic in London have submitted lease applications.

Formerly known as Raigarh Jute Mill, Mohan Jute is located in Raigarh. It produces hessian sacks, carpet backing, jute soil savers, and yarn. 

Pacific Jute in West Bengal is a 100% export-oriented organisation and was established in 2004, while the Jute Republic was founded in 2016 and is headquartered in central London. 

BJMC's Ehteshamul said the privatisation of the state-owned mills would lead to a competitive environment.  

He said private entrepreneurs were more interested in mills around Dhaka than those in remote areas. 

Jute mills' losses and debts 

According to the BJMC, the jute mills incurred losses of Tk573.58 crore in fiscal year 2018-19, up by Tk76 crore than the previous financial year. 

Losses in 2009-10 amounted to Tk275.23 crore. In 2010-11, it was Tk17.53 crore and in 2014-15, it jumped to Tk729.01 crore. 

The current debt of the jute mills is Tk2,387.89 crore – Tk1,079 crore for mills in Khulna, Tk279.33 crore for mills in Chattogram, and Tk915.72 crore for mills in Dhaka. 

The current debt of non-jute mills is Tk11 crore.

Exports down, local sales up 

According to the BJMC, jute's local market sales and export target for 2018-19 fiscal year was 1.095 lakh tons. Only 53% of the target was achieved.

The export target was 87,000 tons, but only 29,000 tons were actually exported.

Compared to 2017-18, export income declined in 2018-19. In 2017-18, goods worth Tk835 crore were exported, which came down to Tk256 crore in 2018-19.

Although exports declined in 2018-19, local sales increased. 

The jute mills earned Tk592 crore from local sales and exports in 2018-19, which was Tk1,164 crore the previous year.

Jute mills have Tk25,000 crore in assets 

According to the BJMC, the total assets of the government jute mills amount to Tk25,352.46 crore, including Tk14,329 crore in fixed assets.

Fixed assets include land, buildings, installations and equipment, furniture, transport vehicles and the like.

The mills in Dhaka have the highest amount of fixed assets valued at Tk4,984.41 crore. This figure is Tk4,435.29 crore for mills in Chattogram, and Tk4,666.19 crore for mills in Khulna. 

Non-jute mills have fixed assets of Tk244.07 crore.

BJMC jute mills at a glance

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

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

Eleven mills were shut down, sold, or merged with other mills at different times after 1993, including 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, five mills have cases pending in court. A project to produce viscose is being implemented at a mill.