The textile and spinning mills of Bangladesh are grappling with a severe gas crisis that has significantly hampered yarn production. This ongoing issue has led to a 13% increase in yarn imports as fabric and apparel manufacturers seek alternative sources to meet demand.
Data from the Bangladesh Bank reveals that the apparel industry imported yarn worth $2.64 billion between July and April of the most recent fiscal year, compared to $2.34 billion in the same period of the previous fiscal year. Apparel exporters are concerned about the double blow of local production struggles and the necessity to import more yarn despite a prevailing dollar crisis. The recent reduction in government incentives could further exacerbate reliance on foreign yarn, impacting the value addition of the Ready-Made Garment (RMG) sector.
The gas supply crisis is a significant factor in this situation. Garments and textile mills typically need 8-10 pounds per square inch (PSI) of gas pressure to operate at full capacity. However, during the day, gas pressure often drops to 1-2 PSI, severely affecting production. According to the Bangladesh Textile Mills Association (BTMA), this low gas pressure forces 70-80% of mills to operate at around 40% capacity.
Rajib Haider, managing director of Outpace Spinning Mills Ltd., highlighted the severity of the situation, stating, “Our production has plummeted below 40% of our capacity as the crisis intensified over the last month.” The most affected areas include Tongi, Joydebpur, Sreepur, Bhaluka, Araihazar in Narayanganj, Palash, Madhabdi, Madanpur, Savar, and Ashulia.
The reduced production capacity has also led to increased costs and cash flow issues, making it challenging for mills to pay workers’ salaries on time. BTMA President Mohammad Ali Khokon noted that despite having orders, spinning mill owners are struggling to meet supply deadlines, potentially forcing garment manufacturers to rely more on imports.
The central bank’s recent decision to reduce cash incentives for local export-oriented textile mills from 3% to 1.5% has further complicated the situation. This reduction is likely to push garment exporters to prefer imported yarn over local alternatives. Mohammad Hatem, executive president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), warned that this could lead the RMG industry towards becoming an “import-dependent export industry.”
The price disparity between local and imported yarns also plays a role. Giant Group Director SM Majedur Rahim mentioned that while local yarn prices have dropped, Indian spinners offer even cheaper alternatives, prompting apparel exporters to favor imports.
In response to the crisis, the BTMA has urged the government to revert to previous gas prices until the supply issues are resolved. They have highlighted that the gas price per cubic meter increased from Tk16 to Tk31.5 in January 2023, yet the promised uninterrupted gas supply has not materialized.
The ongoing gas crisis and the subsequent increase in yarn imports underscore the urgent need for policy adjustments to support local industries and ensure the sustainability of Bangladesh’s textile and garment sector.
