DHAKA: Bangladeshi cotton spinners have expressed concern that they may lose their competitive edge if the government carries out a over a proposed gas price hike for captive power plants. “The spinning sub-sector will be in trouble if the government increases the gas price again. Bangladeshi spinners will face pressures as international yarn producers will then supply products to the local industry at lower prices,” Tapan Chowdhury, President of Bangladesh Textile Mills Association (BTMA) said at a après conference during the World Cotton Outlook Summit in Dhaka this week. The government has proposed to increase gas price by about 130 per cent to Tk 19.22 per cubic metre for captive power plants from the current price of Tk 8.36.
Gas price was last increased in September 2015 when the government raised it to Tk 8.36 per cubic metre from Tk 4.36. At that time, the profit margin from the sale of yarn declined to below $1 per kg, according to industry insiders. For sustainability in yarn trade, a mill requires a profit margin of at least $1. But, it has now dropped to below 60 cents. Local spinners can currently meet 90 per cent of the demand for raw materials of the knitwear sub-sector and 40 per cent of the woven sub-sector. The rest is met through imports, mainly from China and India.
Chowdhury said if the gas price is hiked, spinners will not be able to supply the raw materials to the knitters and garment makers at competitive prices. That would force local garment makers would depend on imported yarn.
The demand for local yarn is higher due to a shorter lead time and better quality, he said. Currently, more than 400 mills have a spinning capacity of 10 million bales of cotton (one bale is equal to 218 kg). But they cannot use their full capacity due to higher power prices, and inadequate power and gas supply to production units. Bangladesh currently imports 6.1 million bales of cotton a year, most of it from India. Local growers can supply only one lakh bales. Chowdhury said. Cotton imports from India increased 36 percent year-on-year to 2.99 million bales in 2015.
