RMG makers want ease of yarn import terms

TBS Infograph

Alleging that local spinning mill owners have raised the price of yarn abnormally on the pretext of increased prices of cotton in the international market, apparel and terry towel exporters in the country have demanded removal of some prevailing barriers to yarn imports.

They have also urged the government to give exporters without a bond licence permission to import yarn with a duty-free facility.

They have taken an initiative to send letters to the ministries and divisions concerned and the Competition Commission to press home their demand. Clothing exporters' associations are going to hold a joint press conference in this regard on Tuesday.

Textile mill owners, however, have denied the allegation brought by RMG makers. They claim they are not making unusual profits.

As the supply of cotton is less than the demand, the price is increasing all over the world, they said, adding that even if yarn is imported in this situation, it will not be viable for the garment industry owners.

More than 81% of the country's export earnings come from readymade garments. Cotton is the main raw material of RMGs, which is dependent on imports. Apart from this, cotton is the main raw material of home textiles – a booming sector that earned more than $1 billion from exports in the last fiscal year.

Local spinning mills import cotton and sell the yarn produced from it to knitwear and home textile manufacturers.

Faruque Hassan, president of the BGMEA, told The Business Standard that the recent rise in the price of yarn has become a major headache for their business.

The price of one kilogram of local yarn used to be 20-30 cents higher than that of imported yarn, but the gap is up to $1 now, he said.

"Thus far, we did not want to import yarn. However, now we have to think of this for the sake of sustaining our business. Therefore, we will write letters to the concerned ministries and divisions of the government to remove all the obstacles in the way of yarn import," said the BGMEA president.

M Shahadat Hossain, chairman of Bangladesh Terry Towel and Linen Manufacturers and Exporters Association (BTTLMEA) made a similar complaint.

Giving his own example, he said the price of 20 ring spun yarn used in towels on 17 July was $3.90, which climbed to $4.30 on 8 August. In India, the same yarn costs $3.40, he added.

"Now we want the government to open yarn imports. Exporters who do not have a bond licence should also be allowed to import yarn with duty free facilities."

He also said his association had already sent a letter to the government demanding the same.

Bond licenced exporters in the country can import yarn with duty free facility. But, almost half of knitwear and terry towel exporters do not have a bond licence. Because of this, they have to pay an additional 30% or more duty on imports.

In case of importing yarn from India by land, all products under a LC have to be brought together. As a result, despite the convenience in imports carried by road, many are unable to bring them.

On the other hand, the government has been offering a 4% cash incentive on exports of garments made of local yarn. This facility will be lost if garments are made of imported yarn.

Ashiqur Rahman Tuhin, managing director of Texweave Group, has been working on the issue with the BGMEA for a long time. He told TBS that there should be a committee comprising representatives from the textile sector, garment sector and the ministries concerned to monitor the market to solve this problem and make the business sustainable.

"Otherwise, we should be allowed to import yarn and the spinning mills should be permitted to export directly."

Mohammad Ali Khokon, president of the Bangladesh Textile Mills Association (BTMA), however, claimed there was a misunderstanding over the issue of rising yarn prices.

He said, "We didn't raise prices. Demand has increased in the international market, but the supply is low. As a result, cotton has to be bought at higher prices.

"Now China is also buying yarn from India. As a result, India is not able to supply yarn to Bangladesh as per the demand."

Another BTMA leader, speaking on condition of anonymity, told TBS that business is largely controlled by supply and demand.

"Now that the demand is higher than the supply, the price has gone up a bit. We cannot force our members to do so. But, did the owners of the garment sector increase the price of yarn when we made losses? Didn't we have to pay bank interest then?" he said.

"Apart from bearing the costs of C&F, LC opening and insurance, the apparel manufacturers will lose the 4% cash incentive on exports if they import yarn from India. Therefore, it will not be viable for importers."

Industry insiders say cotton prices have been rising for the past eight months. This situation has arisen due to low cotton harvesting amid the pandemic. The BTMA president recently said cotton output will be even lesser next season.

In this situation, many, fearing further hike of yarn in the coming days, are booking yarn for the next three to four months or more. As a result, the demand has increased.

Again, due to a crisis of ships, the cost of imports has increased several times.

Khoshed Alam, a former director of the BTMA, said the cost of bringing a 40-foot container from Bandar Abbas before the pandemic was $1,100, which is now $4,000.

Kutubuddin Ahmed, chairman of Envoy Group, said he does not see an immediate solution to the problem until the situation returns to normal.

He said a sustainable solution would not come by force in the demand- and supply-based market system.