Bangladesh Textile Mills Association or BTMA has expressed concerns over a cut in cash incentives for the sector already in trouble over a fuel supply crunch.
The association fears the entire sector will face extinction like the jute industry as the gas crisis has almost halved production capacity.
Its President Mohammad Ali Khokon said at a press conference on Saturday that the government started cutting the incentives and policy support for Bangladesh's textile industry “greatly” without creating alternatives.
To cut the incentives, the government is giving Bangladesh’s graduation from the least developed country or LDC bracket as an excuse while around two and a half years remain before the graduation.
“Such obstacles will lead the industry to the brink of destruction soon," he said.
Khokon gave neighbouring country India’s policy as a good example to help the textile industry grow.
India graduated to a developing nation in 2004, but it is still providing its textile industry with policy support and incentives in different forms as alternatives to cash assistance on a priority basis despite being the second largest producer of cotton in the world, he said.
The export-oriented garment industry has been enjoying 1 to 4 percent cash incentives, but the government has started cutting the assistance to encourage the exporters to prepare for competition with their peers abroad.
The Bangladesh Bank cut the incentives for 43 export products, including readymade garments, in a notice on Jun 30. The cash assistance as an alternative to duty, bond and duty drawback was cut from 3 percent to 1.5 percent.
The additional facility for small and medium enterprises of the RMG sector was cut from 4 percent to 3 percent while the special cash assistance for the sector was reduced to 3 percent from 5 percent.
The notice came into effect on Jul 1.
Khokon said the textile sector had not been able to carry out normal production activities because of the energy crisis for more than three years.
The mills are not able to utilise more than 40 to 50 percent of their production capacity for the acute gas shortage for a few months, according to him.
The cost of production is almost doubling as the production of yarn and cloth has drastically reduced, seriously undermining competitiveness in the sector with competing countries, he added.
At present there are 519 spinning mills, 930 weaving mills and 322 dyeing-printing-finishing mills in the country as members of BTMA.
The total investment in this sector in the last four decades is about $22 billion, the BTMA said in the press conference.
In the last financial year 2023-2024, about 86 percent of the country's total export earnings were earned from the textile and apparel sector, of which BTMA members are suppliers of about 70 percent, the association said.
At present, BTMA member mills supply about 90 percent of the yarn and 45 percent of the weaving requirement of the knitting sector.
The BTMA claimed its members are contributing to the export earnings by meeting 100 percent of the domestic demand for denim, home textiles and terry towels.