RMG industry’s production costs rising due to fuel crisis

The apparel industry’s production costs are increasing due to the fuel crisis, and thus the country’s competitive edge in the global arena is decreasing, said Bangladesh Garment Manufacturers and Exporters Association (BGMEA) President Faruque Hassan on Sunday.

“The factories are continuing their operations with diesel-run generators due to power shortages caused by the fuel crisis,” he said at a programme held in BGMEA Bhaban in Chattogram.

Faruque was exchanging views with journalists at the event organised by the BGMEA’s Chattogram chapter.

He said the government has recently hiked the retail piped gas prices — except in household, fertiliser, and the tea industry — by up to 179 per cent with effect from February 1. For the large industries, as per the new gazette, the price of per cubic metre of the gas has been increased by around 150 per cent from Tk 11.98 to Tk 30, he said.

With an urge to fix prices of gas and power rationally, the BGMEA chief said the ready-made garment (RMG) sector should be given more importance considering the contribution of the export-oriented industrial sector to the country’s economy in terms of sector-wise gas supply.

“For industries, set rational prices and ensure uninterrupted supply of gas and electricity. Withdraw VAT and tax on import in importing gas.”

Faruque said the apparel industry is once again facing new challenges after the Covid-19 pandemic. Due to recent geopolitical tensions, there is a volatile situation in the global economy and that is why developed countries are resorting to austerity measures.

Following the impact, people have cut their purchases and for this, the RMG importers have reduced their volume of orders, he continued.

“Importers are placing small orders instead of placing large orders at once, while buyers are cancelling their orders all of a sudden, and many of them are turning to the deferred payment system. As far as we know, none of the factories has orders for continuing their operations by using full capacity at this moment.”

The BGMEA chief continued that the price of yarn has increased by 62 per cent, the container rent by 350-450 per cent and the costs of dyes and chemicals have increased by 60 per cent in the last one and a half years.

At the beginning of the last year, wages rose by 7.5 per cent while in the last five years, the production cost in the garment industry went up by about 40-45 per cent.

The price of oil in the international market has reached the highest level in three years, which will further increase the price of petrochemical chips, the main raw material for the production of non-cotton products, alongside the costs of container and freight, he said.

“This year there is no opportunity for the RMG industry market to grow. The BGMEA study shows that the market size is unlikely to grow in 2023. Due to the Russia-Ukraine war, there is an economic recession all over the world. People’s purchasing power is decreasing,” Faruque said.

“Even if the global market size becomes smaller, we will try to maintain the volume of exports.”

To face the challenges in the RMG industry, he urged the government to set the tax at source at 0.5 per cent again from the existing 1 per cent.

Mentioning that the BGMEA has focused on the exports of non-cotton garments, Faruque said, “In the garment industry, 74-75 per cent of man-made fibre is now being used. But, around 70 per cent of our apparel factories are still dependent on cotton (yarn).

We are still exporting 70 per cent cotton garments.

“Globally, the yarn market is 25-26 per cent, where our market share is 76 per cent. That means we are doing well. I will not say that we are lagging behind in the non-cotton market. We have many opportunities here as well.”

He said the BGMEA members have invested a lot in producing raw materials for the manufacture of non-cotton fabrics.

“China tops in producing man-made fibre. Vietnam is also far ahead. They can easily bring raw materials from China. But we do not have that opportunity. Therefore, if we get support from the government for the next five years in producing non-cotton fabrics, we will be able to capture the ready market. In order to maintain our export volume, we have to capture the non-cotton market.”