Investment in Textile Slows for Energy Crunch

Due to the ongoing gas and electricity crises, investment in Bangladesh’s primary textile industry has already slowed down. Entrepreneurs yesterday issued a warning that if the energy situation does not improve, it could fall even further.

Investment in the primary textile sector in Bangladesh has already slowed owing to the persisting gas and electricity crises and entrepreneurs yesterday warned that it might fall further if the energy situation does not improve.

The local primary textile sector received new investments worth $6.06 billion in 2021 and $4.15 billion in 2022 despite the coronavirus pandemic.

“The investment would have been much higher had there been no serious challenges such as the gas crisis and poor infrastructures,” said Mohammad Ali Khokon, president of the Bangladesh Textile Mills Association (BTMA), at a press conference at the Hotel Sonargaon in Dhaka yesterday.

“There is skepticism about whether there will be sizeable investments in the sector if the supply of gas with sufficient pressure and electricity doesn’t significantly improve.”

The severe effects of the Russia-Ukraine War, the disruption of the global supply chain, the abnormal increase in gas prices, and the severe shortage of US dollars, according to him, are some of the factors preventing investment in the sector.

Bangladesh has been experiencing a gas shortage since the war broke out, which severely damaged the world’s supply chains and increased energy prices.

Due to a sharp increase in price on the international market and a sharp decline in foreign exchange reserves, the government paused the spot purchase of LNG in July. As gas is rationed to factories as a result of the decision, industrial output has been impacted.

Khokon pleaded with the prime minister to find a quick solution to the primary textile industry’s energy crisis. “If not, things at the factories will only get worse.”

In an effort to reduce its unsustainable subsidy burden within a constrained fiscal framework, the government last month increased the retail price of gas for businesses, power plants, and industrial facilities by 14.5% to 178.9%.

From this month, the price of gas used for power generation increased to Tk 14 for each cubic metre, up 178.9 per cent from the existing rate. Gas will cost Tk 30 per cubic metre for captive power plants and businesses.

That represents an increase of 150 percent for big businesses, 154.7% for medium-sized businesses, and 178.3% for home-based and small businesses.

The rate for captive power plants was raised by 87.5%. Commercial establishments like hotels and restaurants will pay Tk 30.50 per cubic metre, up 14.5%.

Gas supply conditions in the primary textile sector have not improved, and production is still suffering, Khokon said, even after the unusual gas price increase.

In order to meet the gas demand for power generation during the upcoming Ramadan, summer, and ongoing agricultural irrigation season, the government has started the process to import LNG from the spot market.

The head of the BTMA applauded the choice and suggested that it might lessen the gas crisis in factories.

The nation’s readymade garment industry, which accounted for about 85% of the $52 billion in national exports in the most recent fiscal year, is supported by the primary textile industry.

Bangladesh currently has 510 spinning mills with a total annual yarn production capacity of 3.8 billion kilogrammes.

The total annual production capacity of the 20,000 weaving mills, which include small, medium, and large factories, is seven million meters.

Twenty-five textile mills have a production capacity of 800 million metres and 40 denim mills can produce 700 million metres of fabrics every year.

According to the BTMA, 1.70 lakh crore has been invested in the primary textile industry overall.

Other difficulties are being faced by the primary textile industry as well.

For instance, many mills are struggling to run their operations in full swing because of a shortage of scrap in the local market as a section of traders exports the textile waste.

Additionally, there is a lack of raw materials at five mills that make yarn from recycled plastic products.

The production of man-made fibers like polyester, viscose, staple fiber, flux fiber, and lyocell is currently made in about 50 local mills, but according to Khokon, this is insufficient to meet the growing demand for these materials.

“The government should stop allowing the export of textile scrap to increase the supply of raw materials in the recycling industries.”

The country’s share in the $700 billion global manmade fibre is only $10 billion, which indicates that it has a lot of opportunities to raise its share.

The press conference was held to inform journalists about the upcoming 17th Dhaka International Textile and Garment Machinery Exhibition, which will take place at the International Convention City, Bashundhara in Dhaka from February 15 to February 18.

The event is anticipated to draw more than 1,200 companies from 35 nations.

Originally scheduled to take place in 2020, the exhibition had to be postponed due to Covid-19.

Reference: https://www.thedailystar.net/business/economy/news/investment-textile-slows-energy-crunch-3246236