Spinning mill operators in the country have called on the government to enforce a mandatory condition, requiring the procurement of 70% of their total cotton yarn from domestic sources under back-to-back letters of credit, aiming to alleviate the current dollar crisis.
The Bangladesh Textile Mills Association (BTMA) conveyed this demand to the National Board of Revenue Chairman, Mr. Abu Hena Md Rahmatul Muneem, in a letter in December last year.
In the letter, the BTMA highlighted that utilizing local yarn in apparel production would result in a 65% value addition, as opposed to a 30% value addition when using imported yarn.
On the other hand, apparel exporters, however, find the BTMA’s demand unacceptable, arguing that local yarn lacks price competitiveness. The spinning millers’ association countered this, asserting that the price disparity between local and imported yarn is only 15-25 cents per kilogram, emphasizing Bangladesh’s reliance on imported cotton and other components for yarn production.
The BTMA argued that local spinners can supply export-standard carded and combed yarn in substantial quantities, capable of meeting 85% of the total demand of the export-oriented apparel industry.
Additionally, the spinning millers’ association urged the NBR to assess the import price of yarn’s compatibility with prices in other competitor countries before allowing the release of goods from ports. They proposed the installation of a yarn count testing machine at land ports and the recruitment of more trained manpower to prevent revenue loss.
Opposing the demand, garment manufacturers argue that although the price of local yarn exceeds the international market rate, they still procure it in significant quantities from the local market. They believe that without mandatory requirements, local spinners should enhance their quality and competitiveness to capture a larger market share.
Mr. Faruque Hassan, President of the Bangladesh Garment Manufacturers and Exporters Association, emphasized the challenges of making it compulsory for garment makers to buy 70% of yarn from local spinning mills in an open-market economy. He acknowledged the increased value addition in the readymade garment sector by using local yarn but emphasized the need for local spinners to be competitive, given the substantial price gaps between local and imported yarn in certain cases.