Don’t hike gas price further: factory owners
Textile millers and garment factory owners today urged the government not to further hike gas prices, as any additional increase would raise production costs and harm their competitiveness in global markets.
The government's proposed 150 percent hike in gas prices, from Tk 30 per cubic metre to Tk 75, will deter investment inflow to the primary textile and garment sectors, ultimately affecting employment generation.
For all latest news, follow The Daily Star's Google News channel. The leaders of the Bangladesh Textile Mills Association (BTMA), Bangladesh Garment Manufacturers and Exporters Association (BGMEA), Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), and Bangladesh Terry Towel & Linen Manufacturers & Exporters' Association (BTTLMEA) made the call through a joint letter to Muhammad Fouzul Kabir Khan, adviser to the power ministry.
The country's demand for gas was 25,947 million cubic metres (MMCM), of which 18 percent was supplied to the industrial sector in the 2023-24 fiscal year, the associations said in the letter.
Of the gas supplied to industries, 30 percent, or 1,400 MMCM, was allocated to the garment sector. If every unit of gas price is hiked by Tk 45, the garment sector will have to spend an additional Tk 6,300 crore annually, equivalent to 1.5 percent of the total export earnings of apparel industries.
Meanwhile, the captive power plants of the primary textile sector—consuming 10 percent of the country's demand or 2,595 MMCM annually—will have to spend an additional Tk 11,675 crore annually, which amounts to 2.7 percent of the sector's export value.
The capacity of local industries will decline, and they will lose global competitiveness because of these high additional expenditures, the associations mentioned in the letter.
The proposed gas price hike will also affect investment inflow to the garment and textile sectors, the letter read.
The situation will worsen further if gas becomes costlier, as capital machinery imports in the garment and textile sectors have already declined in recent times.
In the July-November period of the current fiscal year, capital machinery imports in the garment sector fell by 8.95 percent year-on-year, while imports in the textile sector declined by 18.11 percent, according to Bangladesh Bank data.
The price of per-unit garment items sent to the USA and European Union markets fell by 4.24 percent and 4.83 percent, respectively, in the 11 months to November last year, during which global demand for garment items also dropped by 5 percent, the letter said.
In the meantime, the cost of production in the two sectors has continued to rise due to various factors.
In December 2023, garment workers' salaries were increased by 56 percent, and in the same month the following year, the government raised the rate of annual increment for RMG workers from 4 percent to 9 percent.
Over the past five years, gas prices have risen by 286.5 percent, power prices by 33.5 percent, diesel prices by 68 percent, and bank interest rates have climbed to 14-15 percent. These increases have collectively caused a 50 percent rise in production costs for industrial firms, the letter read.
During the same period, the government reduced cash incentives against the use of local yarn to 1.5 percent from the earlier 4 percent.
The associations also said the textile and garment sectors have been severely affected by the fallouts of the July uprising, which impacted every sector, including import, export, banking activities, labour management, and law and order.
The proposal for a gas price hike has been made at a time when industrial units are already facing acute gas pressure, with most textile mills in Gazipur, Mymensingh, Narayanganj, and Savar running at 40 percent to 50 percent capacity, the letter said.
Although the government hiked gas prices by 150 percent with effect from January 2023, the industries are yet to benefit from the increase, as the supply has not improved.
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