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Poor power supply, unfair practices leading to closure of textile mills

A good number of local textile mills have shut down operations in the last couple of years due to various factors, including inadequate power supply, unfair trade practices, and use of age-old machinery, industry insiders said.Besides, poor capacity utilization, deferred L/C (letter of credit) payment, buyers’ undue pressure and demands, lack of adequate finance, and absence of long-term policy are also blamed for closure of the units.According to Bangladesh Textile Mills Association (BTMA), some 74 spinning mills, 116 weaving mills and 44 textile product processors, like – dyeing and finishing mills, were closed in last calendar year. Some nine spinning mills suspended their operation in 2016.Until 2016, a total of 424 spinning mills, 794 weaving mills and 241 dyeing, printing and finishing mills have been registered with BTMA.The $6.0-billion industry currently has an annual yarn spinning production capacity of 2,410 million kg, woven fabric capacity of 3,580 million meters, and dyeing, printing and finishing capacity of 2,795 million meters.Out of those, 30 per cent of the spinning mills and 50 per cent of the weaving mills, small and medium in size, are not in operation during the last three to four years, according to the association.”Shortage of gas is one of the major reasons behind the situation,” said BTMA vice president Md Ali Khokon.The mills cannot use their full capacity due to low gas pressure, which is one of the main elements, like – cotton, keeping their machinery idle for a long time during daytime, although gas price has been increased several times, he said.Moreover, there were many mills that could not go for upgradation, among others, where uninterrupted gas was also required.Unfair trade practices among the local millers, especially to sell their produced items at prices lower than their production cost, is another reason for their failure to sustain, said another miller.It seems that they adopt such unfair strategies sometimes to run their business, but in the long run these affect the sector, he added.BTMA suggested its member factories in this month to stop unfair trade practices for ensuring sustainable business in the long run and averting any untoward situation.The move came following the allegation that some of the member factories are selling their products at prices lower than their production cost, mainly to run their units and meet regular expenditures, sources said.A large amount of investment is needed to set up a spinning mill, and almost all the mills took loans from banks and financial institutions the other hand. But, weavers are not willing to take financial support from banks, BTMA sources said.There are names of spinning mills in the top 100 defaulters’ list that has been recently disclosed in Parliament.A BTMA official said the mills, included in the defaulters’ list, are in operation, and they might have made some arrangements among themselves in this regard.Delwar Hossain, managing director of Delwar Textile in Narsingdi, said his fabric-producing textile mill with 50 machines is near to closure due to shortage of work orders.His unit is facing financial crisis, as three of his buyers have been dilly-dallying in making due payments, he alleged.The weaving mills that are not currently in operation are small and medium in size, and are mostly located in Madhabdi and Narsingdi. They have failed to compete with their backdated machinery, which also failed to ensure sufficient work orders for them and good price of their products, industry insiders said.Many of them, especially the smaller ones, have phased out from business, as they did not get payments timely, they added.Despite various obstacles, some mills are going for expansion, depending on their own power supply capacity, as majority of the spinning mills have captive power generation facility, the BTMA vice president said.He opined that there is no alternative to expansion to lessen overhead cost and cost of doing business that have been gradually increasing every year.  He noted that Export Development Fund has helped in this regard to some extent.The BTMA leaders said the sector has huge potentials to grow further, provided uninterrupted power supply, adequate infrastructure facility, and long-term policy support that will help entrepreneurs to plan about their investment.Currently the primary textile sector supplies nearly 80 per cent raw materials to knitwear industry and 40 per cent to woven sector, according to BTMA.Centre for Policy Dialogue (CPD) research director Dr Khondaker Golam Moazzem emphasised finding out the reasons behind the closure of small and medium-sized units, especially the competitive pressures including rising cost of production and doing business.He also focused on taking appropriate measures to keep the mills in business, saying the phasing out of such small entrepreneurs is a matter of concern.He opined that growth in import of machinery and raw materials, including raw cotton, cotton and synthetic yarn, showed that capacity of the backward industry is not declining, as reflected in rise in investment in new units or expansion of the existing ones.He suggested that the sector needs to grow further, keeping power situation in mind and considering electricity or LNG-based boiler operation in future.


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