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Millers demand policy reforms as tariff disparities threaten textile industry

Published : Sunday, 16 March, 2025 at 12:00 AM  Count : 1815
Mohd Khorshed Alam
Bangladesh's textile industry faces severe challenges due to tariff imbalances, high production costs, and an ongoing gas crisis. While the government aims to protect local manufacturers, current tariff structures have instead created an uneven playing field, leading to factory closures and economic distress. Textile millers are demanding urgent policy reforms in the upcoming national budget to safeguard their industry, prevent further shutdowns, and enhance local value addition in the country's dominant ready-made garment (RMG) sector.

The textile sector relies on both local production and imports of fabrics and yarns, but low tariff values on imported fabrics have flooded the market with cheaper foreign textiles. This disparity has created unfair competition, pushing local manufacturers to the brink of collapse. Bangladesh currently imposes tariffs on Shirting Fabrics (HS CODE- 5407) for finished fabrics per kg between 3.00 - 3.50 USD, whereas the actual market price is between USD 12.00 - USD 15.00 per kg (equivalent to 4 meters per kg).

Locally, fabrics are sold at TK 1200 to 1800 BDT per meter in fabric shops. Imported textiles are priced at USD 12.50 per kg, but widespread under-invoicing allows many importers to declare much lower prices than the actual market value. As a result, imported fabrics enter the market at prices significantly lower than local production costs. Many factories have already shut down, while others struggle to remain operational under mounting financial pressure.

To counter this threat, textile millers demand that the government increase the tariff value of imported fabrics in the national budget. They argue that if immediate action is not taken, many mill owners will be left with no choice but to surrender their factories to banks due to rising loan defaults and mortgage burdens. The industry needs a protective tariff framework to prevent imported fabrics from undermining local businesses.

Beyond tariff disparities, the gas crisis has crippled textile production. As an energy-intensive sector, textile manufacturing relies on a consistent gas supply for dyeing, finishing, and other processes. Frequent disruptions and unstable gas pressure have significantly reduced factory output. Millers insist that textile factories should receive gas at the same average price (Avra price) as power plants. Given the industry's contribution to the national economy, fair pricing is essential to maintain competitiveness.

Illegal gas connections and widespread pilferage have further aggravated the crisis. Textile millers argue that if the government clamps down on illegal gas usage and improves transmission efficiency, industrial gas pressure will stabilize. They demand that the national budget include strict measures to eliminate gas wastage and theft, ensuring a reliable energy supply for the sector.

Smuggling through land borders has added another layer of crisis. Illegal imports of fabrics and yarns have flooded the domestic market with untaxed and low-cost products, making it impossible for local manufacturers to compete. Textile industry leaders urge the government to tighten border controls and enhance monitoring mechanisms at customs checkpoints to prevent illegal textile imports. Without decisive action, smuggling will continue to erode the industry's financial stability.

Export-oriented factories, particularly in the woven and knit sectors, play a crucial role in Bangladesh's economy. However, increasing production costs and tariff disadvantages have weakened their global competitiveness. To sustain the sector's growth, textile millers demand a 12-15% incentive for export-oriented factories in the budget. This financial support would help mitigate rising expenses and enhance Bangladesh's position in the international market.

A major concern within the industry is the low level of local value addition in RMG exports. Despite being the world's second-largest exporter of ready-made garments, Bangladesh remains heavily dependent on imported fabrics and raw materials. This dependency limits the sector's contribution to the national economy and restricts local employment opportunities.

Industry leaders urge the government to introduce policies that promote domestic value addition. They recommend subsidies and tax incentives for local fabric and yarn production, higher tariffs on imported raw materials that can be sourced locally, and investments in backward linkage industries to create a stable domestic supply chain. If properly implemented, these measures will reduce reliance on foreign imports, retain earnings within the country, and strengthen Bangladesh's textile sector.

Waste declaration misuse in RMG factories has further complicated the industry's struggles. Many manufacturers report excessive waste percentages, well above actual levels, allowing them to import surplus fabrics and yarns. These excess imports are often diverted into the local market, disrupting fair competition for textile millers.
To address this issue, millers are calling for a thorough assessment of waste declarations in RMG factories. Stricter monitoring will ensure that fabric imports are based on actual production needs rather than inflated waste claims. If the government enforces accurate waste assessment, Bangladesh can significantly reduce unnecessary fabric imports and protect its domestic textile sector.

Bangladesh's textile industry stands at a crossroads. Unfair tariff policies, energy shortages, illegal imports, and waste mismanagement have put local manufacturers at a severe disadvantage. Without immediate government intervention, the sector risks mass factory closures, job losses, and long-term economic damage.

In the upcoming national budget, textile millers are demanding tariff hikes on imported fabrics to protect local producers, equitable gas pricing to ensure stable production, stronger border controls to curb smuggling, export incentives to boost global competitiveness, and policy measures to increase local value addition in RMG exports. Additionally, accurate waste assessment in RMG factories is critical to prevent excess imports under false claims. NBR/BTMA/BGMA/BKMEA, along with third-party inspection companies, should jointly review the actual wastage percentage of yarns and fabrics. According to our information, woven garments' wastage percentage should not exceed 5-6% in cutting and sewing, but garment factories may be importing 25-28% on finished fabrics, which is not acceptable to local fabric manufacturers.

Same applies to knit garment factories-what percentage of wastage are they showing? We request our honourable garment factory owners to sincerely consider what they are doing for the country, or if their actions are only benefiting themselves.

If these concerns are addressed, Bangladesh can revitalize its textile industry, safeguard local production, and strengthen its standing in global trade. However, failure to implement necessary reforms will accelerate factory shutdowns, pushing the industry into deeper crisis and creating greater economic uncertainty.

The writer is Chairman, Standing Committee on Development of Local Spinning Weaving & Dyeing-Finishing Mills of BTMA


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