An estimated four out of five tanneries are expected to face a liquidity crisis in purchasing rawhide during Eid ul-Azha this year following the forced relocation of their factories.
In keeping with a Supreme Court order to improve the environment of Hazaribagh, the Department of Environment (DoE) cut off the power, water and gas connections to the Hazaribagh tanneries in Old Dhaka on April 8.
Shahid Ullah, the owner of Ajmeer Leather, has been exporting leathers to 20 countries over the past 15 years but said his production had “almost stopped” since moving from Hazaribagh to the purpose-built Savar Tannery Estate on the edge of the capital last April.
“I bought 60,000 pieces of rawhide with a bank loan during the last Eid ul-Azha, but due to the tannery relocation I have not been able to run my factory for the last five months,” he told the Dhaka Tribune.
Shahid said he had failed to adjust the bank loan and had been forced to cancel a 30,000-piece export order for hide.
“I will not be able to buy rawhide this year for liquidity shortage,” he said.
The Salma Tannery owned by Md Shakawat Ullah - also the general secretary of Bangladesh Tanners Association (BTA) - told the Dhaka Tribune that there are 100,000 pieces of wet blue hide still stored in his factory and that he too would not be able to adjust his bank loan from last year.
“I bought 2.10 lakh pieces of rawhide last year, but I could not export them for tannery relocation,” he said. “I do not know how I will be able to buy rawhide this year.”
The Bangladesh Finished Leather, Leather Goods and Footwear Exporters Association (BFLLFE) said most tanners
had failed to sell their 2016 hides and will be unable to take fresh loans.
“The tanners will face a liquidity crisis and with the disbursed liquidity we will be able to buy only 20% of the rawhides,” BFLLFE President Mohiuddin Ahmed Mahin said.
However, the four state-owned banks have decided to give loans worth Tk735 crore to tannery-owners to purchase rawhides.
Of the banks, Janata Bank will disburse the largest amount of credit worth Tk300 crore, followed by Rupali Bnak Tk185 crore, Sonali Bank Tk150 crore and Agrani Bnak Tk100 crore.
Rupali Bank managing director Ataur Rahman Prodhan told the Dhaka Tribune that his bank was still disbursing loans to its regular clients and to those whose factories are in operation.
“We will disburse credit to them who can adjust their previous loan. Otherwise, the dues would be adjusted as fresh loans,” he said.
This year, the tanners have planned to collect 80,000 pieces of rawhide and have urged the Finance Ministry to issue a special order to the banks for giving them loans considering the overall situation of the leather sector.
“The banks are not giving us loans at the eleventh hour and that’s why we will face a liquidity crisis as we have already counted our losses due to the complexity with tannery relocations,” BTA General Secretary Md Shakawat Ullah told the Dhaka Tribune.
“Moreover, if we do not get loans the next season will be the worst year for the country’s leather industry. That’s why the government has to take necessary steps immediately.”