Knitwear manufacturers disappointed over new wastage rate
As per the latest decision of the Commerce Ministry, maximum wastage rates will be 27% for basic items, 30% for specialized items and 4% for sweaters and socks
Dhaka Tribune
Saddam Hossain
Publish : 27 Dec 2021, 09:03 PMUpdate : 27 Dec 2021, 09:04 PM
Knitwear manufacturers have expressed disappointment over the announcement of the Bangladesh Bank on implementing the new RMG wastage rate, terming the rate as “unreasonable” and “unrealistic”.
The central bank has asked authorized dealer branches to implement the newly introduced readymade garment (RMG) wastage rate in a circular issued on Sunday.
According to the latest decision of the Commerce Ministry, the maximum wastage rates will be 27% for basic items, 30% for specialized items and 4% for sweaters and socks.
This is important for knitwear manufacturers because if the production wastage rate of an export-oriented RMG manufacturer, who enjoys a duty-free facility for raw material imports, is less than the prescribed rate, they sell the excess raw materials in the open market.
This eventually damages the business of local companies that produce raw materials.
On the other hand, if the actual wastage rate is higher than the rate set by the government, the authorities impose duty, supplementary duty and VAT on the extra wastages.
Mohammad Hatem, executive president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), said that this rate is not acceptable.
“We are disappointed with the decision of the Ministry of Commerce. This will hamper the growth of exports. We want at least 35% wastage rate,” he added.
He also said that the newly introduced wastage rate is by no means reasonable and they have already sent a letter to the Ministry of Commerce mentioning that.
“The new waste rate will not solve the problems, but further accelerate them,” he added.
He also said that the Commerce Ministry has formed a committee to verify the actual wastage rate in garment factories.
“After inspecting six factories, they have found that wastage rate is more than 40%. So, to solve the problem, a realistic rate has to be announced according to the results obtained from the visit,” he added.
While the committee found evidence of 40% waste, it is not clear on what basis the newly introduced rate was given, he added.
“We do not understand how they set the rate at 27% and 30%,” Hatem said.
Another disappointing fact is that on the circular for the new rate, the Ministry of Commerce asked to make it effective immediately, the knitwear sector leader said.
“They notified us about the circular on December 19, and the rate has been effective since that day. But there was no effective direction in the circular to resolve the issues regarding this new wastage rate,” he added.
He further said it is important to indicate the disposal of the number of cases related to wastage rate at the current rate.
Earlier, on December 19, the government had revised the maximum wastage rates from 16% to 27% for the production of basic knit items — t-shirts, polo shirts, trousers, shorts, skirts, pajamas — as per the recommendation of a committee that the ministry formed a year ago following the requests of the manufacturers.
Apart from the basic items, the authorities, for the first time, created separate categories and set a wastage rate of 4% for sweaters, socks and similar item productions, and 30% for special items including rompers, gowns, and hoodies.
However, Mohammad Hatem, in a letter to Commerce Minister Tipu Munshi, expressed concerns over the newly-set rates and said the actual wastage was higher than the newly set rates.
In the letter, BKMEA urged the government to raise rates to 30% for basic knit items, 35% for special items, and 12% sweaters and socks items.
Multiple meetings were held with the commerce minister and the secretary to redefine the wastage rates, where stakeholders presented detailed data on the actual wastage rates with practical explanations.
Sadly, the re-evaluation of the rates did not reflect it, added the letter.
Around 90% of knitwear are basic items.
The letter also reads that no sweater factory has been inspected by the committee so far but the wastage rate is fixed at 4% for the items, which is completely unreasonable.
The rate in sweater production is usually more than 12%, the BKMEA said.
In January of this year, the BKMEA and the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) sent a proposal to the Commerce Ministry, requesting it to increase the maximum wastage rate to 40%.
Later, the Export Promotion Bureau sent a letter to 20 companies, asking them to find out the actual wastage rate where two companies responded saying their wastage rates were more than 40%.
After that, the Commerce Ministry formed a committee to verify the actual wastage rate in garment factories.
Knitwear manufacturers disappointed over new wastage rate
Knitwear manufacturers have expressed disappointment over the announcement of the Bangladesh Bank on implementing the new RMG wastage rate, terming the rate as “unreasonable” and “unrealistic”.
The central bank has asked authorized dealer branches to implement the newly introduced readymade garment (RMG) wastage rate in a circular issued on Sunday.
According to the latest decision of the Commerce Ministry, the maximum wastage rates will be 27% for basic items, 30% for specialized items and 4% for sweaters and socks.
This is important for knitwear manufacturers because if the production wastage rate of an export-oriented RMG manufacturer, who enjoys a duty-free facility for raw material imports, is less than the prescribed rate, they sell the excess raw materials in the open market.
This eventually damages the business of local companies that produce raw materials.
On the other hand, if the actual wastage rate is higher than the rate set by the government, the authorities impose duty, supplementary duty and VAT on the extra wastages.
Mohammad Hatem, executive president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), said that this rate is not acceptable.
“We are disappointed with the decision of the Ministry of Commerce. This will hamper the growth of exports. We want at least 35% wastage rate,” he added.
He also said that the newly introduced wastage rate is by no means reasonable and they have already sent a letter to the Ministry of Commerce mentioning that.
“The new waste rate will not solve the problems, but further accelerate them,” he added.
He also said that the Commerce Ministry has formed a committee to verify the actual wastage rate in garment factories.
“After inspecting six factories, they have found that wastage rate is more than 40%. So, to solve the problem, a realistic rate has to be announced according to the results obtained from the visit,” he added.
While the committee found evidence of 40% waste, it is not clear on what basis the newly introduced rate was given, he added.
“We do not understand how they set the rate at 27% and 30%,” Hatem said.
Another disappointing fact is that on the circular for the new rate, the Ministry of Commerce asked to make it effective immediately, the knitwear sector leader said.
“They notified us about the circular on December 19, and the rate has been effective since that day. But there was no effective direction in the circular to resolve the issues regarding this new wastage rate,” he added.
He further said it is important to indicate the disposal of the number of cases related to wastage rate at the current rate.
Earlier, on December 19, the government had revised the maximum wastage rates from 16% to 27% for the production of basic knit items — t-shirts, polo shirts, trousers, shorts, skirts, pajamas — as per the recommendation of a committee that the ministry formed a year ago following the requests of the manufacturers.
Apart from the basic items, the authorities, for the first time, created separate categories and set a wastage rate of 4% for sweaters, socks and similar item productions, and 30% for special items including rompers, gowns, and hoodies.
However, Mohammad Hatem, in a letter to Commerce Minister Tipu Munshi, expressed concerns over the newly-set rates and said the actual wastage was higher than the newly set rates.
In the letter, BKMEA urged the government to raise rates to 30% for basic knit items, 35% for special items, and 12% sweaters and socks items.
Multiple meetings were held with the commerce minister and the secretary to redefine the wastage rates, where stakeholders presented detailed data on the actual wastage rates with practical explanations.
Sadly, the re-evaluation of the rates did not reflect it, added the letter.
Around 90% of knitwear are basic items.
The letter also reads that no sweater factory has been inspected by the committee so far but the wastage rate is fixed at 4% for the items, which is completely unreasonable.
The rate in sweater production is usually more than 12%, the BKMEA said.
In January of this year, the BKMEA and the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) sent a proposal to the Commerce Ministry, requesting it to increase the maximum wastage rate to 40%.
Later, the Export Promotion Bureau sent a letter to 20 companies, asking them to find out the actual wastage rate where two companies responded saying their wastage rates were more than 40%.
After that, the Commerce Ministry formed a committee to verify the actual wastage rate in garment factories.
Topics: