Home ›› 05 Oct 2021 ›› Front
Apparel exporters have called for product-specific fabrics waste rates instead of a flat one to reap maximum benefits and prevent misuse of bond facilities.
The government recently decided in principle to set fabrics waste rate at 25 per cent for basic products, 28 per cent for specialised items and 3 per cent for the sweater.
But industry insiders said unscrupulous businesspersons might take advantage of the “unwise decision”, noting that fabrics waste depends highly on product types.
Export-oriented apparel manufacturers are currently enjoying an average 16 per cent wastage rate on manufacturing RMG goods. Recently, textiles and apparel makers urged the government to review the margin.
If the wastage exceeds the fixed rate, manufacturers have to pay import duty, supplementary duty and VAT. To protect the domestic textile industry, the government imposed 32 per cent duty on mixed fabrics and 37 per cent on cotton fabrics imported outside the bond facility.
Apparel exporters with bond licenses enjoy duty-free facilities to import raw materials, including machinery, cotton, fabrics, chemicals, and accessories.
Bangladesh imports fabrics worth around $10 billion from the global market. Local manufacturers meet around 85 per cent demand for knit fabrics and 35 per cent for woven, industry insiders said.
In January this year, Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) and Bangladesh Garments Manufacturers and Exporters Association (BGMEA) jointly sent a proposal to the commerce ministry to increase the maximum wastage rate to 40 per cent. The ministry formed a committee to verify the actual wastage rates at garment factories.
The committee recommended three category-based rates after visiting six factories – 25 per cent for basic knitwear items, including t-shirts, polo shirts, trousers, shorts, skirts, pyjamas; 28 per cent for specialised items like rompers, tank tops, dresses, gowns, hoodies, and lingerie items; and 3 per cent for jumpers, pullovers, cardigans, vests, and socks.
Dyeing dept sees highest wastage
Industry insiders said the wastage rate is 18 to 20 per cent for basic items.
While making a good quality basic item, 13 per cent of fabrics are wasted on average in the dyeing department, 3 per cent in cutting, 1 per cent in sewing, 1 per cent in printing and the miscellaneous wastage is 2 per cent, they said.
“Wastage in the dyeing department is huge, sometimes running over 3 per cent but improving workers’ skill can reduce it,” an official of the Square Fabrics told The Business Post.
Another factory manager said that it was possible to keep wastage within 3 per cent in cutting and sewing, which goes up to 5 per cent due to unskilled workers.
Dyeing owners said that they waste 8 to 9 per cent during colour yarn dyeing, but it reached 14 per cent for white or fresh colour. Sometimes, basic items need re-dyeing, which pushes up wastage.
“Dyeing department sees the highest wastage. If we use high-quality chemicals and skilled workforce, we can cut the wastage by one per cent,” Shahidul Islam, Managing Director of Rupa Group, told The Business Post.
Value-added products see wastage above 35%
The rate at times jumps to 35 per cent or above during the manufacturing of value-added products. Manufacturers said that the jackets, jeans, hoodies, and other value-added products need 30 to 35 per cent wastage.
“For manufacturing hoodies, we need to use a brush to make the fabrics soft, but it leads to huge wastage. How can we continue producing the goods if the government sets the wastage rate at 28 per cent? This will force us to resort to short shipment (exporting a lower quantity of goods than those mentioned in shipping documents) in that case,” BKMEA Vice-President Fazlee Shamim Ehsan told The Business Post.
The Fatullah Apparels CEO said the government agencies are free to visit factories any time to see the actual wastage in the production process.
Export Promotion Bureau data show that Bangladesh exported $31.45 billion worth of apparel goods in FY20-21, including around $17 billion in knitwear and $14.45 billion woven goods.
Manufacturers said that Bangladesh is now trying to come out of manufacturing basic items but the workers are not used to making value-added products, leading to higher wastage.
“We have to understand that we are still in the stage of manual production. To ensure the best quality, the government must allow product-wise wastage rate,” Abdullahil Rakib, Managing Director of Team Group and director of BGMEA, told The Business Post.
Rakib said the scenario was different in Bangladesh. China and Vietnam are semi-automated while European countries are automated, which means their wastage rates are low. It won’t make sense to take these wastage rates as the base and fix one for Bangladesh.
Exporters said that business people might misuse a flat wastage rate.
A knitwear factory owner said the basic item producers don’t need a 25 per cent wastage ceiling. “There’s a good chance that manufacturers will sell the rest in the local market and the government will lose revenue,” he said.
Envoy Group Chairman and former BGMEA president Kutub Uddin Ahmed said product-wise wastage rates would be the best solution for the manufacturers and the government.
Sweater sector demands higher wastage
Sweater factory owners said the proposed 3 per cent wastage for them is unrealistic. The sector earns around $3 billion in export a year.
“We need a wastage rate between 8 and 14 per cent depending on the product,” said Shahidul Islam, a former BGMEA vice-president.
Mahbubur Rahman Lucky, the managing director of Southeast Sweater, told The Business Post that China needed a minimum 6 per cent wastage rate despite using high-quality machinery and skilled workers.
“We will be forced to opt for short shipment if the government does not accept our demand,” he said.
