Uncertainty over the prices of imported liquefied natural gas (LNG) and the ongoing gas shortage in the industrial sector have severely jeopardised investments in the country’s primary textile industry.
The uninterrupted supply of gas and electricity is a must for the textile industry, as blackouts significantly degrade the quality of spin, sources from the industry told the Dhaka Tribune.
However, the government has halted new gas connections indefinitely and is preventing the factories from setting up generators to produce captive power to ensure electricity supply during the power cuts, said sources from the factories.
As a result, new investors are losing interest in the primary textile sector, while existing businesses are facing hardship due to the hike in prices of gas and electricity.
“Over the last two years, gas prices have seen a 222% jump (and) on top of that, the government is going to import LNG,” the Bangladesh Textile Mills Association (BTMA) president, Tapan Chowdhury, told the Dhaka Tribune.
“If the prices of imported gas are more expensive than the local supply, that would hit the industry even harder. The spinning industry will have difficulty just surviving.”
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According to the BTMA - which represents about 1,500 members from the textile sector - only 17 new companies have started production in the last five years. Of these, 10 are spinning mills, five are weaving mills, and the remaining two are dying units.
“A good number of factory owners are facing trouble as they do not have any forward linkage industry. They are struggling to survive,” said Tapan.
The BMTA president is also the managing director of Square Textiles Limited. “The production cost of my factory has gone up by Tk22 crore over the past year due to the power price hike,” he said.
The millers are still confused about the future price range of imported LNG, as the government is yet to provide any sort of information in this regard. The situation for Tapan and his members will only worsen if the government approves a proposal for a further 14.78% rise in power prices.
The crisis in the primary textile industry may have a negative knock-on impact on the country’s $28 billion apparel industry, to which it supplies the lion’s share of raw materials.
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“If there is any adverse impact on the primary textile industry, it would consequently hurt the apparel sector, as manufacturers will have to buy the material from other countries at a higher price,” BMTA Director Razeeb Haider told the Dhaka Tribune.
The textile industry contributes more than 12% to the country’s overall GDP. 85%-90% of the demand for knit and 40% of the demand for woven fabrics for the export oriented RMG sector are met by the primary textile sector.
“The primary textile industry, including spinning and weaving, consumes more energy than the RMG industries. So energy shortage would create a serious impediment in attracting the investors to this sector,” said former BTMA president Jahangir Alamin.
To ease the existing power crisis and help ensure an uninterrupted power supply for smooth production, primary textile millers have been urging the government to allow the import of energy efficient machinery.
“To end the existing crisis, the older machineries have to be replaced with the new energy efficient ones. There has been a plan from the government to make such replacement,” Jahangir Alamin said.
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According to the BTMA, most of their member factories use captive generators to ensure instant power supply for which the factory owners need gas or heavy furnace oil (HFO). But the older power generators consume more fuel and gas to produce electricity so the factory owners have been looking for new energy efficient technologies with a view to reducing power consumption.
The primary textile have also demanded duty-free or bonded warehouse facility for importing the HFO needed for their captive power generators, amid the ongoing gas shortage.
“The government should plan for multiple energy sources and should allow the duty free importing of HFO in a bid to reduce the cost of per unit electricity production,” BMTA President Tapan Chowdhury said.
He said it costs Tk11 to generate one unit of electricity after purchasing HFO from the Bangladesh Petroleum Corporation (BPC), while it would cost Tk6.5 per unit if it was directly imported with duty free facility.
Currently, importers have to pay a 35% duty when importing HFO.
“We have already started talks with the government to make HFO import duty-free so that the primary textile sector can run well,” Tapan said.