Spinners yesterday expressed their concerns and apprehensions over fears of shutting down factories for increasing the stockpiling of unsold cotton yarn.
At present, the unsold stockpiled yarn reaches 2.5 lakh tonnes, with a current market valuation of Tk 9,000 crore, said Jahangir Alamin, president of Bangladesh Textile Mills Association (BTMA), at a press briefing at the association's office in Dhaka.
He said local yarn makers has been spinning yarn from high-cost imported cotton a few months ago, but the prices of both yarn and cotton registered a fall since the months of May and June.
As a result, demand for local yarn also declined as the weavers and knitters prefer importing cheaper yarn from India and China, to purchasing at a higher cost from the local market, he said.
The average cost of imported cotton was $2.20 a pound, and the highest price of the white fibre reached $2.52 a pound in April. But, the price drastically fell to $1-$1.3 per pound in the international market.
The price of yarn was fixed at $6.5 a kilogram at the production level. The prices were fixed at a higher level because the yarn was spun from high-cost cotton, he said. The prices of yarn then fell to $3-$3.5 a kg. So, the spinners cannot sell the yarn at lower prices, he said.
“The spinning sub-sector will lose Tk 5,500 crore for price fall of yarn in the local market,” he said.
“We will not be able to sustain such huge losses. If the government does not come forward with supportive policies, we will be compelled to shut down the factories.”
Besides, the textile makers are running the factories at 50 percent capacity due to gas and electricity shortages, said Alamin. So, it would not be economically viable to run the factories if the situation continues deteriorating in this way, he added.
He said the country has 377 spinning mills, 705 weaving mills and 231 dyeing-printing-finishing mills under the association. Several lakh people depend on the Tk 30,000-crore sector directly, he added.
The BTMA boss demanded at least a six-month moratorium on import of cotton and yarn from India to help the spinning sub-sector survive. “We want at least a six-month moratorium so that we can sell the stockpiled produce and come at a par of sorts,” he added.
He also urged the government to increase the cash incentive to 15 percent from existing 5 percent until 2015.
“The Indian government has recently revived its 7.67 percent subsidy on cotton and yarn exports. The subsidy is applicable from April. As a result, we will suffer more from the price disadvantage once again,” he said.
They also demanded converting working capital into term loan, and the loan should be put on the interest free block account for two years as the spinners and weavers are in liquidity crisis due to inventory loss.
The spinners also urged the authorities to lower the bank interest rate down to single digit, as the current interest rate is comparatively high, said Alamin.
He said primary textile plants cannot be set up without bank finance because it is a capital intensive industry. As a result they are losing the competitiveness in the international market.
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