The unused land of the country’s state-owned jute mills could be privatised in a bid to reduce escalating factory losses and accommodate private companies in the vacant spaces.
The Ministry of Jute and Textiles is considering the move despite recent revelations that most of the jute premises privatised since the 1980s have violated the government’s terms in seeking to maximise their own profits.
Speaking to the Dhaka Tribune, Bangladesh Jute Mills Corporation (BJMC) chairman, Dr Md Mahmudul Hasan, said the prime objective of the move is to make sure that the factories’ abandoned land is properly used.
“The government is taking this initiative with an aim to make good use of the land and minimise the losses the mills have been incurring for years. The investors will have to run only jute or jute-related businesses,”, Mahmudul said.
Three of the 26 government-owned mills have been selected in the first phase of the plan: UMC Jute Mills Ltd in Dhaka, Forat-Karnafuli Carpet Factory in Chittagong, and The Crescent Jute Mills Co Ltd in Khulna.
“We are planning to divide the properties into small industrial lots to hand them over to companies which are interested to invest in the jute sector, initially for 25 years” he said.
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According to the 2015-16 annual report of BJMC, however, the managerial body of government jute mills incurred a loss of around Tk620crore in the FY2015-16 Syed Zakir Hossain
Currently, the state-owned jute mills are operating on around 1,200 acres of land under the BJMC’s supervision. Among them, 22 are production-oriented factories, three usually manufacture machinery for jute mills, and the remaining one has been closed due to pending lawsuits over its ownership.
Nine of the 26 factories are located in Khulna and Jessore, 10 in Chittagong, two each in Narshingdi and Demra in Dhaka, and one each in Rajshahi and Sirajganj.
According to the 2015-16 annual report of BJMC, however, the managerial body of government jute mills incurred a loss of around Tk620crore in the FY2015-16. The figure was Tk720crore the previous year.
Private mills more efficient
In addition to those factories under the government-run BJMC, there are around 200 mills operating under two other associations – Bangladesh Jute Spinners Association (BJSA) and Bangladesh Jute Mills Association (BJMA).
Although comparatively small in size and capacity, many of them have been turning profits in recent years.
According to the BJSA, the mills under the supervision of the two associations produce an average around 730,000 tonnes of jute and jute products annually. In contrast, the average annual production of the 26 state-run mills has been estimated at only 197,000 tonnes.
The average quantity and export value of privately-produced jute products are also much higher.
Reports show that in the period 2015-16, mills under the BJSA and BJMA exported goods worth Tk3,482 crore and Tk1,036 crore respectively, while the BJMC factories exported products worth only Tk995 crore.
For annual domestic consumption, 46,000 tonnes of jute products are supplied by BJMA, 27,000 tonnes by BJSA, and 39,000 tonnes by BJMC, according to the reports.
Private efficiency gains or commercial opportunism?
According to the ministry’s figures, since 1982 the government has handed over a total of 134 jute and textile mills to private sector companies on the condition that they would never change the nature of business.
However, recent findings reveal that most of the factories transferred to the private sector have been found in violation of the government’s terms.
Among them, 69 were found to have infringed the conditions by selling the properties or by changing the nature of the business, ministry officials said.
“The government has decided to reclaim the privatised mills that breached the terms,” BJMC Chairman Mahmudul said.
“Some of the factories have already returned their properties to the government, while the reclaiming of land from the other factories is underway.”