Gas crisis forces textile mills to operate at 30-40% capacity

60% of them vulnerable to severe losses as a result

Since the gas shortage began in March earlier this year, textile mills have been operating at only 30%-40% of their total production capacity, according to the association of textile millers.

At least 60% factories out of 1,700 member factories of the Bangladesh Textile Mills Association (BTMA) were in a vulnerable position because of the severe gas crisis, they said at a press briefing on Saturday.

Moreover, the mills located around Dhaka, in Narayanganj, Araihazar, Madhabdi, Ashulia, Savar, Gazipur, Sreepur, Bhaluka region, as well as Chittagong and Comilla, were facing an average of 12-hour shutdowns due to gas shortage as they were operating through captive power generation.

BTMA President Mohammad Ali Khokon said textile millers demanded uninterrupted supply of gas to keep their production running.

Mohammad Ali Khokon Courtesy

“We are even ready to pay partially higher rates from the current price of gas if the government can supply uninterrupted power to the industrial units by at least 3,000 mmcfd a day,” he added.

If the government will import 200 MMcfd gas from spot market by $25/mmbtu, and import 500 mmcfd by agreement price $15 mmbtu, average per m3 gas price (including domestic supply) reach Tk22.83, and they are ready to pay it.

“Even if the government will import LNG from the spot market by $30 MMBTU, the average price will reach to Tk28, but it will help our industry to survive, which is now bound to stop production up to 12 hours due to the gas crisis,” he added.

Although the government will have to spend $360 million additional from forex reserves per month to import LNG from the spot market, by consuming $200,000, they are helping to earn $4.8 million through export.

“In a long term contract, Bangladesh was set to get about 500 mmcf LNG from Qatar and Oman. But we have come to know that Bangladesh got 360 mmcf of gas instead of 500 mmcf due to missing one of the regular notifications,” he added.

However, he didn’t reveal the name of the accused authority or something clear about the notifications when asked.

Due to the Russia-Ukraine war, per m3 gas price in the spot market rose up to $35 from $6-$7.

On the other hand, the government has fallen in the forex reserve crisis, which is dwindling to $37 billion from $48 billion a few months back.

Khokon said investment of $16 billion in the country’s primary textile sector was in a vulnerable position for the lack of adequate gas supply to the textile mills.

Asked if paying an additional portion of the price for buying LNG from the spot market at a higher price would help them make a profit, he said that now the main focus is to sustain the industry.

“The cost of production of yarn is $1.25 per kg. If there is a 12-hour shut down, it increases to $2.5 per kg. So, if the government buys LNG from the spot market and sells to us at Tk22.83/m3, the cost would be $1.35 per kg, so our profit margin may be narrowed, but we surely will sustain,” he added.

He also said that they established factories in remote areas but the areas have become populated and the authority provided them with gas from their primary source, which further contracted the supply.

He also said that 84% of the export earnings are from the textile and apparel sector.

“Investment in the textile sector is around $16billion and it contributes more than 13% to GDP. It also meets 85%-90% yarn demand for knit RMG and 40%-45% fabric demand for woven RMG,” he added, saying that it also meets 7 billion meter fabric for local demand with a value of $8 billion approximately.

The sector claims $29 billion from textile and clothing export earnings and with a retention of $21 billion from the backward linkage industry.

“The sector generates more than 1,700 MW power through captive generation and they pay around Tk500 crore per year against gas consumption of 169.1 billion cubic feet.

“Due to the ongoing crisis, we have already lost export orders worth $1 billion export from the textile sector and the employment of 1 million people also under risk,” he added.