Lower sales of agri-machinery, spare parts hurting light engineering sector

The agricultural machinery and spare parts segment of the light engineering sector in Bangladesh has been suffering from significantly lower sales for the past one-and-a-half years, according to industry people.

This is because the ramifications of Covid-19 and the ongoing Russia-Ukraine war have forced consumers to restrict spending amid the ensuing economic uncertainty resulting from global inflationary pressure.

Besides, a US dollar crunch in the country is causing difficulties in opening letters of credit (LCs), leading to higher import costs for required components, they said.

Although there is no reliable data, industry people believe their sales have decreased by around 40 percent compared to previous levels.

The light engineering sector produces a diverse range of items, including import substitute machinery and spare parts used in cement mills, construction, and manufacturing.

However, agricultural machinery and spare parts dominate the industry, with a market share of around 45 percent.

"The light engineering sector is passing a terrible situation as sales of agricultural machinery and spare parts declined by around 35-40 percent amid the economic crisis and price hike of required components," said Ashraful Islam Babu, proprietor of Ripon Engineering Workshop in Jashore.

He informed that light engineering workshops manufacture all kinds of spare parts and machinery, such as stone crushers, shallow-engine machines and water pumps.

But agricultural machinery and spare parts see higher demand than any other item, he added.

Babu, also president of the Light Automobile Engineering Owners Association, said their production costs have increased by around 35 percent as the price of various inputs has doubled or tripled this year.

"We cannot even open LCs to import the required materials as we do not have the financial strength like corporate houses. So, production has reduced by around 50 percent," he added.

As such, workshop owners are being deprived of profit or even facing losses in some cases.

Md Abdur Razzaque, president of the Bangladesh Engineering Industry Owners Association, said they have lost hope in an immediate revival of the business as the situation will not improve until the country's economy stabilises.

According to him, the light engineering sector manufactures hundreds of types of spare parts and machinery, catering to the agriculture sector and other heavy industries such as textiles and garments.

Razzaque said the workshops in Dhaka, Narayaganj, and Gazipur mostly produce industrial items but those in areas like Jashore, Khulna, Bogura and Syedpur make agricultural and electric-related items.

According to him, the sector suffered a lot during the Covid-19 pandemic while it is now plagued by economic turbulence due to the impact of the Russia-Ukraine war.

The owners are currently fighting to keep their workshops running to at least recover operational costs and pay the salaries of workers.

But at the same time, they are working hard to improve the business situation and tackle the crisis, he added while pointing out that they do not have access to finance for being in an unorganized sector.

Razzaque also said some light engineering workshops cannot directly import their required inputs for having poor financial health.

Several workshops are even on the cusp of shutting down due to a lack of sufficient capital, he added.

Abul Kashem Titu, the owner of Mafia Engineering in Dhaka, said their overall sales have declined by more than 50 percent over the past year.

According to him, the situation had improved after the pandemic as orders were available. However, the scenario has changed since July 2022.

"Now, I only get orders from the corporate sector to supply a maximum of two to three units per month while it was five to eight orders before the Russia-Ukraine war," he said.

"The overall business of the light engineering sector is witnessing a tough situation that may not alleviate within the next six months," Titu added.

As per data of the Bangladesh Engineering Industry Owners Association, the yearly turnover of light engineering equipment and spare parts has condensed to Tk 16,000 crore over the past one-and-a-half years from about Tk 26,000 crore in 2019.