Apparel makers seek diesel price cut as soaring costs eat into their capital

Soaring production costs, exacerbated by costly fuel, are now even eating into business capital, making survival especially for apparel manufacturers a big ask, say industry people.

To shore up their falling businesses, they now demand that the government readjust diesel prices in keeping with the global market fall.

Shedding light on how operational costs accelerated to the fastest pace, Apurbo Sikdar, director of Narayanganj-based knit composite Wisdom Attires Limited, said, "In September, we had to spend Tk1.5 crore extra on diesel for running generators because of load shedding and severe gas shortage."

Yet, his factory has been forced to pay Tk45 lakh in gas bill that month, he noted.

"Now, we are losing $1 on diesel for making a dozen T-shirts. But our profit from selling those is less than $1. So, we are counting losses, let alone making profits," he also said.

They are running factory operations even at losses only to keep their customers, Apurbo added.

Sharing a similar situation, Fazlee Shamim Ehsan, managing director of Fatullah Group, said he has already requested his banks to defer the payment of loan instalments.

Against such backdrops, the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) in a letter to Prime Minister Sheikh Hasina has demanded that necessary steps be taken for reducing the diesel price for the apparel sector as many factories are having to operate with the expensive fuel despite a drop in the international market.

Last year diesel was sold at Tk80 per litre and this year it is now being sold at Tk109 in the domestic market. Many factories have been running with diesel to mitigate the losses from load shedding. 

Factory owners are finding it quite difficult to keep production up and running with the pricey diesel, reads the letter signed by BGMEA President Faruque Hassan.

Talking to The Business Standard, Faruque Hassan said, "Entrepreneurs are now in a tight corner owing to shortages of gas and electricity and high spending on diesel."

The BGMEA president said they have sought the prime minister's intervention in rationalising the diesel price in keeping with the international market, which will give a big relief to all.

According to the Wall Street Journal, crude oil price was $92.67 per barrel on Wednesday at 8 pm as per continuous contract, which was $127.98 in August this year.

Mohammad Hatem, executive president of the Bangladesh Knitwear Manufacturers and Exporters Association, also said they have a plan to meet with the prime minister "as knitwear exporters have been facing the gas shortage since 18 August this year in Narayanganj area".

He further explained that generally they have gas pressure 9-10 pounds per square inch (PSI) but it has now come down to 1-1.1 PSI.

The BKMEA executive president said many of them were forced to use diesel-run generators to produce garments to meet their buyers' shipment deadline as a result production halved, which was reflected in September's export earnings.

"If we get adequate gas supply for the knitwear industry, our annual growth will be a minimum of 25%," he added.

Noting that factory production in September fell by at least 45% due to gas shortages, Mohammad Hatem stated that export earnings can double if the government increases allocation for LNG imports by $2 billion.