The Bangladesh Textile Mills Association (BTMA) has threatened to shut down all spinning mills across the country indefinitely from 1 February if the government fails to withdraw the bonded warehouse facility for imports of 10-30 count cotton yarn.
The warning came at a press conference on Thursday at BTMA’s office in the capital’s Karwan Bazar.
The association said that if its demand is not met within the next seven days, mill owners would have no option but to halt production nationwide.
The decision is aimed at protecting local industry, investment and employment, BTMA President Showkat Aziz Russell said.
“If the commerce ministry’s recommendation is not implemented, the textile industry will face an extreme crisis. Any labour unrest arising from such a situation will be the sole responsibility of the government,” he said.
The decision to shut the mills followed a request by the commerce ministry to the National Board of Revenue on 12 January to suspend duty-free yarn imports under the bonded warehouse facility. The move was aimed at protecting domestic spinning mills.
However, apparel exporters have opposed the government’s move, warning that it would disrupt supply chains, raise production costs and ultimately hurt export earnings.
Yarn of 10–30 count is a key raw material for knit garments and is mainly imported from India.
According to BTMA, the production cost of locally made yarn is about $3 per kilogram, while Indian millers produce similar-quality yarn at $2.85 to $2.90 per kilogram and export it to Bangladesh at around $2.50, undercutting local producers with the help of Indian government incentives.
Apparel industry leaders said withdrawing the bonded warehouse facility for yarn imports could cause an immediate export loss of nearly $5 billion, as it would also increase yarn prices by at least 35 to 60 cents per kilogram, undermining export competitiveness.
“The government must find alternative solutions. If the apparel industry is harmed, the spinning industry will also be destroyed, and neighbouring countries will benefit from the situation,” Mohammad Hatem, president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), told TIMES of Bangladesh.
As an alternative, he suggested that the government could provide a 10 per cent cash incentive to spinning millers for one year.
This, he said, would make yarn prices competitive by narrowing the gap between locally produced and imported yarn to 10–15 cents per kilogram, keeping local yarn less than 10 per cent more expensive and therefore affordable.
Under the bonded warehouse system, garment exporters can import yarn duty-free on the condition that finished products are exported within a stipulated timeframe.
If the facility is withdrawn, yarn importers would have to pay an average duty of 38 per cent, Hatem said.
However, BTMA president Russel rejected claims made by some garment sector entrepreneurs that the proposal would impose new duties on yarn import, clarifying that there is no recommendation for additional tariffs or safeguard duties.
“Only those yarns that can be fully supplied by local mills are proposed to be kept outside the bonded facility. Under existing NBR rules, exporters can still claim duty drawback if they import raw materials by paying duties,” he said.
He also pointed out that the bonded facility has been in place for 45 years and is now being grossly misused. If it continues unchecked, new investment in the local textile sector will be discouraged, non-performing loans in the banking sector will rise, and around 2.5 million direct and over 10 million indirect jobs will be put at risk.
Meanwhile, the Buyers’ Council, an association of the country’s buying houses, has expressed deep concern over the threat of an indefinite shutdown of spinning mills.
In a statement, the group warned that if the decision to close textile mills is enforced, it could deal a severe blow to the export sector.
‘60 mills have already shut down’
According to BTMA, the association has 1,869 member mills, comprising spinning, weaving, dyeing, printing and finishing units, with total investment in the sector amounting to around $23 billion—the largest single private-sector investment in the country.
About 85% of national export earnings come from the textile and apparel sector, with nearly 70% of inputs supplied by BTMA-led textile industries.
The sector generates around 30% foreign currency retention, which rises to 40%–50% when accessories are included.
Sector insiders say the textile sector has been grappling with multiple crises for a prolonged period.
These include widespread misuse of bonded facilities, abnormal hikes in gas and electricity prices, bank interest rates rising to as high as 16%, sharp cuts in export cash incentives and a severe working capital crunch caused by currency depreciation.
According to BTMA, at least 60 textile mills have already shut down, while the remaining mills are operating at around 50% capacity. Unsold yarn worth around Tk12,500 crore is currently piled up across the sector.
Spinning millers said under the prevailing circumstances, it would soon be impossible to repay liabilities to banks and financial institutions.
“If any instability emerges in the banking and financial sector as a result, the responsibility must also be borne by the government,” BTMA president said.
BTMA member mills meet 100% of domestic demand for denim, home textiles and terry towels and supply nearly all of the clothing needs of the country’s 170 million people, saving about $8 billion in foreign exchange annually.
Russell added that with appropriate policy support, Bangladesh’s export earnings could reach $100 billion by 2030.
