A recommendation by the Bangladesh Ministry of Commerce to withdraw bonded warehouse facilities, effectively imposing duties, on the import of cotton yarn from India and other countries has once again created instability in the readymade garment (RMG) and textile sectors, Dhaka-based sources claimed.
The garment ector stakeholders have also questioned the justification of this recommendation, alleging that it was made hastily without comprehensive studies or consultations with all relevant parties.
“Economists and business leaders note that Indian yarn has historically been priced 20 to 25 cents higher per kilogram than domestically produced yarn. However, due to increases in gas and electricity prices and ongoing supply shortages, high interest rates on bank loans, and the depreciation of the taka against the US dollar, which has raised the cost of importing raw materials, the production costs of domestic spinning mills have also risen,” according to a report in the leading Bangladesh daily Prothom Alo.
if bonded facilities are withdrawn, garment exporters will be compelled to purchase yarn from domestic sources, at prices approximately 40 cents per kilogram higher than imported yarn.
Former Bangladesh Knitwear Manufacturers and Exporters Association President Fazlul Hoque told Prothom Alo, “Why should we bear the burden of inefficiency in the textile sector? Withdrawing bonded facilities effectively grants textile mill owners a monopoly. Garment manufacturers will be forced to buy yarn at whatever price they set. Such a decision cannot, in any way, be considered prudent for a globally competitive business like the readymade garment sector.”
Last month the Bangladesh Textile Mills Association (BTMA) sent a letter to the Bangladesh Trade and Tariff Commission demanding either the imposition of a 20 per cent safeguard duty on imports of 10–30 count cotton and blended yarn from India, or the withdrawal of bonded facilities for such imports, in order to reduce imports from India, according to the Prothom Alo report.
For nearly four decades, the readymade garment industry, particularly knitwear exporters, has imported yarn under bonded facilities. If these facilities are withdrawn, they will have to pay nearly 40 per cent in duties on yarn imported from India and other countries.