he government has doubled the cash incentive for the operational mills in primary textile sector from the existing five per cent to 10 per cent for the current fiscal year, in an effort to save the Tk 300 billion industry that has hit hard by plummeting sales in recent months owing to volatile cotton prices in the global market and the easing of import rules by the European Union (EU).
An extra amount of about Tk 7.0 billion from the public exchequer will be involved in the current fiscal for implementing the latest decision on cash incentive, a senior official in the ministry of finance (MoF) said.
The MoF increased the incentive last Tuesday. The ministry also asked Bangladesh Bank (BB) to convert the short-term bank loans of the problem-ridden textile mills into long term debt obligations so that the latter do not become loan defaulters.
The textile mills -- both spinning and weaving, which are also members of Bangladesh Textile Mills Association (BTMA) -- will be eligible for the enhanced cash incentive that has been made effective from July, 2011, the MoF's order said.
However, the BTMA members who bought cotton at higher prices between the period from August, 2010 to March, 2011 have been made eligible for getting the benefit of the latest increase in cash incentive. The average price of cotton bought for the last six months from August, 2010 will be the 'basis' for ascertaining whether the millers had bought cotton at higher prices, the order elaborated.
The BTMA leaders and mills owners have welcomed the government decision to increase the amount of subsidy in a guarded manner. They had earlier sought subsidy at the rate of 15 per cent for, what they called, their survival after being threatened by external factors.
They said the country's primary textile sector faced the grim prospect of a disaster as they had no market to sell their products, leading to piling up of their huge inventory, worth about Tk 60 billion to Tk 70 billion.
Local textile mills in which a heavy amount of money, in both foreign and local currencies, was invested because of its capital intensive nature, bought cotton at high prices from the international market and are now facing severe difficulties in selling their products at a price much lower than their manufacturing cost, following the fall in the cotton prices in the global market.
The mills have also been hit by EU's relaxation of import rules from January this year. The relaxed rules now allow the Bangladeshi apparel makers to get duty-free access to the 27-nation bloc by sourcing yarn from anywhere in the world.
In the past, local textile mills enjoyed a protected domestic market as the earlier EU rules would require the apparel makers to source their yarn and fabric requirements from within the country in order to enjoy duty-free access to the economic bloc.
"We welcome the government for doubling the cash incentive but this would not remove all our problems to stay afloat in business as the textile mills are being hit badly by plummeting sales in recent months owing to volatile cotton prices in the global market and the European Union's easing of import rules," Vice-President of Bangladesh Textile Mills Association (BTMA) Ahmed Ali told the FE on Thursday.
"We have lost our competitiveness to a great extent following the single-stage regulation of the EU," he added.
Ali urged the government to increase the incentive in the form of subsidy to at least 15 per cent and bring policy changes for the textile sector that are needed to protect this capital intensive sector.
Textile millers claimed that the single-stage regulation of the EU, which provides duty-free access to the Bangladesh market, is benefitting countries like India, China and Pakistan but not protecting the interests of the least developed countries (LDCs) like Bangladesh.
However, the exports of readymade garments by Bangladesh witnessed a marked rise to the European market after the relaxation of the EU's rules of origin (RoO) criteria, the official figures showed.
The country's primary textile sector includes spinning, weaving, printing, dyeing and finishing. The sector has been playing an important role as the backward linkage industries for woven and knitwear garments by supplying fabrics and yarn until this year.
Currently, the primary textile sector has the capacity to meet the demand for more than 80 per cent of fabric requirements by knitwear and 40 per cent of the same by woven sub-sectors of the readymade garments (RMG) industries in Bangladesh, the textile business circles stated.
Prior to the relaxation of RoO for the LDCs, the country's primary textile sector was protected for many years, as the garment makers used to purchase their fabrics from the local textile mills to enjoy duty-waivers in the EU market.
The imports of woven fabrics by the garment makers increased by 88.34 per cent and knitwear fabrics, by 32.35 per cent, during the January-March period of this year compared to the same period last year after the relaxation of the RoO criteria by the EU.
http://www.thefinancialexpress-bd.com/more.php?news_id=150471&date=2011-09-23
An extra amount of about Tk 7.0 billion from the public exchequer will be involved in the current fiscal for implementing the latest decision on cash incentive, a senior official in the ministry of finance (MoF) said.
The MoF increased the incentive last Tuesday. The ministry also asked Bangladesh Bank (BB) to convert the short-term bank loans of the problem-ridden textile mills into long term debt obligations so that the latter do not become loan defaulters.
The textile mills -- both spinning and weaving, which are also members of Bangladesh Textile Mills Association (BTMA) -- will be eligible for the enhanced cash incentive that has been made effective from July, 2011, the MoF's order said.
However, the BTMA members who bought cotton at higher prices between the period from August, 2010 to March, 2011 have been made eligible for getting the benefit of the latest increase in cash incentive. The average price of cotton bought for the last six months from August, 2010 will be the 'basis' for ascertaining whether the millers had bought cotton at higher prices, the order elaborated.
The BTMA leaders and mills owners have welcomed the government decision to increase the amount of subsidy in a guarded manner. They had earlier sought subsidy at the rate of 15 per cent for, what they called, their survival after being threatened by external factors.
They said the country's primary textile sector faced the grim prospect of a disaster as they had no market to sell their products, leading to piling up of their huge inventory, worth about Tk 60 billion to Tk 70 billion.
Local textile mills in which a heavy amount of money, in both foreign and local currencies, was invested because of its capital intensive nature, bought cotton at high prices from the international market and are now facing severe difficulties in selling their products at a price much lower than their manufacturing cost, following the fall in the cotton prices in the global market.
The mills have also been hit by EU's relaxation of import rules from January this year. The relaxed rules now allow the Bangladeshi apparel makers to get duty-free access to the 27-nation bloc by sourcing yarn from anywhere in the world.
In the past, local textile mills enjoyed a protected domestic market as the earlier EU rules would require the apparel makers to source their yarn and fabric requirements from within the country in order to enjoy duty-free access to the economic bloc.
"We welcome the government for doubling the cash incentive but this would not remove all our problems to stay afloat in business as the textile mills are being hit badly by plummeting sales in recent months owing to volatile cotton prices in the global market and the European Union's easing of import rules," Vice-President of Bangladesh Textile Mills Association (BTMA) Ahmed Ali told the FE on Thursday.
"We have lost our competitiveness to a great extent following the single-stage regulation of the EU," he added.
Ali urged the government to increase the incentive in the form of subsidy to at least 15 per cent and bring policy changes for the textile sector that are needed to protect this capital intensive sector.
Textile millers claimed that the single-stage regulation of the EU, which provides duty-free access to the Bangladesh market, is benefitting countries like India, China and Pakistan but not protecting the interests of the least developed countries (LDCs) like Bangladesh.
However, the exports of readymade garments by Bangladesh witnessed a marked rise to the European market after the relaxation of the EU's rules of origin (RoO) criteria, the official figures showed.
The country's primary textile sector includes spinning, weaving, printing, dyeing and finishing. The sector has been playing an important role as the backward linkage industries for woven and knitwear garments by supplying fabrics and yarn until this year.
Currently, the primary textile sector has the capacity to meet the demand for more than 80 per cent of fabric requirements by knitwear and 40 per cent of the same by woven sub-sectors of the readymade garments (RMG) industries in Bangladesh, the textile business circles stated.
Prior to the relaxation of RoO for the LDCs, the country's primary textile sector was protected for many years, as the garment makers used to purchase their fabrics from the local textile mills to enjoy duty-waivers in the EU market.
The imports of woven fabrics by the garment makers increased by 88.34 per cent and knitwear fabrics, by 32.35 per cent, during the January-March period of this year compared to the same period last year after the relaxation of the RoO criteria by the EU.
http://www.thefinancialexpress-bd.com/more.php?news_id=150471&date=2011-09-23
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