If we implement better policies, our Textile sector will advance
Armada Spinning Mills Ltd. manufactures mixed, slub, compacted, carded, combed and vortex yarn. It is experienced in producing a range of counts from 10/1 to 40/1 using raw components of renowned businesses. Modern technology is used throughout the line, from the back process to the end. It has established a capacity of 27 tons per day and a setup of 48,000 spindles. In July 2023, 27,000 more spindles and 11 vortex m/c will be produced. He discussed the pressing problems facing the spinning industry today and potential solutions during the discussion.
Recently, Md. Abul Kalam Azad, Director of Operations of Armada Spinning Mills Ltd., had a thought-provoking discussion with Team Textile Focus. He is a seasoned spinning specialist with over 27+ years of technical expertise. Throughout his career, he worked at numerous well-known spinning mills in Bangladesh. A brief conversation is given below for our readers.
Textile Focus: We are seeing a positive shift in our ready-made garment (RMG) export sector. In this regard, how do you evaluate the contribution of our domestic yarn manufacturing factories? Also, what is the current overall state of the industry?
Md. Abul Kalam Azad: If we look back a little, during the COVID-19 period, business conditions were bad worldwide. However, we managed to tackle the situation better than countries like India, which faced more significant issues. After the pandemic, the market rebounded, and we received a large number of orders. The real problem started when the Russia-Ukraine war began, negatively impacting the world economy, which led to a significant drop in orders in the garment industry. Another major issue was the influx of duty-free yarn from India. As a result, our industry saw a decline in orders, and we observed a loss of around 30-40 cents per kilogram during that period. We have been incurring this loss for more than two years, but the situation is gradually improving.
International Production Cost Comparison 2018( ITMF)
Minimum Costing Different = 14%
To address this, we must implement specific policies, such as stopping duty-free product imports under the bond facility. No other country in the world allows such practices, as it violates national trade laws. Some argue that without bonded yarn imports, garment manufacturers will struggle to secure orders, but I don’t believe this is entirely true. According to an ITC report, Bangladesh sells garments at prices 32%–83% lower than other countries. Garment manufacturers and dyeing factories determine product prices based on the yarn costs in India, even though they do not benefit from cheap Indian yarn or Chinese fabric imports. The ultimate buyers benefit instead. Meanwhile, the ITMF report states that textile sector costs vary by 72% globally, indicating that cost fluctuations exist everywhere.
Source: ITC Report
If we implement better policies, our textile sector will advance. However, if we increase both exports and imports equally, there will be no real benefit. We need to boost our export rate while reducing our import rate. According to the IGC report, our cost difference with India and Pakistan is only 15%, which is within a tolerable range. Yarn from India and Pakistan should enter Bangladesh only with proper duties. This would prevent foreign yarn from undercutting local production, ensuring a level playing field. Additionally, we must consider factors like high gas prices, reliance on imported cotton, and power shortages. Countries like Turkey and China have higher yarn prices, but their governments protect their backward linkage industries by restricting duty-free product imports. In contrast, such unrestricted imports are common in Bangladesh. If we stop this, our backward linkage industry will recover, and dollar earnings will increase.
Textile Focus: Currently, buyers are available in the market, but domestic spinning mills are struggling to sell their yarn. What challenges are you facing in this regard?
Md. Abul Kalam Azad: Due to the dollar crisis in our banking sector, we are unable to secure dollar transactions smoothly. We usually sell yarn under back-to-back LCs, where payments are received after 90 or 120 days, sometimes even after 5-6 months. However, when purchasing cotton, we must make at-sight payments. If the government and Bangladesh Bank decide that cotton can be purchased under back-to-back LCs, like other accessories, the supply chain in our industry would run more smoothly. If yarn could be purchased through known garment industry contacts, the dollars brought into the country would not need to be sent back out, reducing dependency on banks and easing pressure on foreign reserves.
Looking at neighboring countries like India, China, and Pakistan, they can buy cotton today, produce yarn tomorrow, and sell it the next day. However, in our case, it takes 2-3 months for yarn to reach the market, by which time the market situation changes. This increases our raw material holding costs. Merchants in Bangladesh have to keep cotton either in warehouses or on ships, leading to high costs. However, if international merchants were allowed to store fiber in bonded warehouses within Bangladesh and export from there, it would significantly reduce costs. This policy has been requested for the past 10-15 years but has not yet been implemented. If enacted, I believe our total costs would decrease by 7%-8%, providing substantial benefits to the spinning sector.
Textile Focus: What are your views on new investments in the spinning sector? What are your industry’s plans in this regard?
Md. Abul Kalam Azad: Currently, we are unable to fully utilize our production capacity due to the surge in yarn imports from India. News outlets like Prothom Alo,The Daily Star,Samokal and The business Standard have reported that yarn imports from India have increased by about 39% over the past 6-7 months. Additionally, the Indian government provides a 6% incentive on exports, making their yarn significantly cheaper. This has made it difficult for us to compete, leading to excessive yarn dumping in our market.
As a result, we have significantly reduced production and are still operating at a loss of around 25-30 cents per kilogram. Given this situation, there is no opportunity for new investments. If we can establish proper policies and the government thoroughly considers the issue of yarn imports from India, Pakistan, and Vietnam, our industry’s backward linkage sector will recover. This will also attract significant foreign investment into the sector.
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Armada Spinning Mills Ltd. manufactures mixed, slub, compacted, carded, combed and vortex yarn. It is experienced in producing a range of counts from 10/1 to 40/1 using raw components of renowned businesses. Modern technology is used throughout the line, from the back process to the end. It has established a capacity of 27 tons per day and a setup of 48,000 spindles. In July 2023, 27,000 more spindles and 11 vortex m/c will be produced. He discussed the pressing problems facing the spinning industry today and potential solutions during the discussion.
Recently, Md. Abul Kalam Azad, Director of Operations of Armada Spinning Mills Ltd., had a thought-provoking discussion with Team Textile Focus. He is a seasoned spinning specialist with over 27+ years of technical expertise. Throughout his career, he worked at numerous well-known spinning mills in Bangladesh. A brief conversation is given below for our readers.
Textile Focus: We are seeing a positive shift in our ready-made garment (RMG) export sector. In this regard, how do you evaluate the contribution of our domestic yarn manufacturing factories? Also, what is the current overall state of the industry?
Md. Abul Kalam Azad: If we look back a little, during the COVID-19 period, business conditions were bad worldwide. However, we managed to tackle the situation better than countries like India, which faced more significant issues. After the pandemic, the market rebounded, and we received a large number of orders. The real problem started when the Russia-Ukraine war began, negatively impacting the world economy, which led to a significant drop in orders in the garment industry. Another major issue was the influx of duty-free yarn from India. As a result, our industry saw a decline in orders, and we observed a loss of around 30-40 cents per kilogram during that period. We have been incurring this loss for more than two years, but the situation is gradually improving.
International Production Cost Comparison 2018( ITMF)
Minimum Costing Different = 14%
To address this, we must implement specific policies, such as stopping duty-free product imports under the bond facility. No other country in the world allows such practices, as it violates national trade laws. Some argue that without bonded yarn imports, garment manufacturers will struggle to secure orders, but I don’t believe this is entirely true. According to an ITC report, Bangladesh sells garments at prices 32%–83% lower than other countries. Garment manufacturers and dyeing factories determine product prices based on the yarn costs in India, even though they do not benefit from cheap Indian yarn or Chinese fabric imports. The ultimate buyers benefit instead. Meanwhile, the ITMF report states that textile sector costs vary by 72% globally, indicating that cost fluctuations exist everywhere.
Source: ITC Report
If we implement better policies, our textile sector will advance. However, if we increase both exports and imports equally, there will be no real benefit. We need to boost our export rate while reducing our import rate. According to the IGC report, our cost difference with India and Pakistan is only 15%, which is within a tolerable range. Yarn from India and Pakistan should enter Bangladesh only with proper duties. This would prevent foreign yarn from undercutting local production, ensuring a level playing field. Additionally, we must consider factors like high gas prices, reliance on imported cotton, and power shortages. Countries like Turkey and China have higher yarn prices, but their governments protect their backward linkage industries by restricting duty-free product imports. In contrast, such unrestricted imports are common in Bangladesh. If we stop this, our backward linkage industry will recover, and dollar earnings will increase.
Textile Focus: Currently, buyers are available in the market, but domestic spinning mills are struggling to sell their yarn. What challenges are you facing in this regard?
Md. Abul Kalam Azad: Due to the dollar crisis in our banking sector, we are unable to secure dollar transactions smoothly. We usually sell yarn under back-to-back LCs, where payments are received after 90 or 120 days, sometimes even after 5-6 months. However, when purchasing cotton, we must make at-sight payments. If the government and Bangladesh Bank decide that cotton can be purchased under back-to-back LCs, like other accessories, the supply chain in our industry would run more smoothly. If yarn could be purchased through known garment industry contacts, the dollars brought into the country would not need to be sent back out, reducing dependency on banks and easing pressure on foreign reserves.
Looking at neighboring countries like India, China, and Pakistan, they can buy cotton today, produce yarn tomorrow, and sell it the next day. However, in our case, it takes 2-3 months for yarn to reach the market, by which time the market situation changes. This increases our raw material holding costs. Merchants in Bangladesh have to keep cotton either in warehouses or on ships, leading to high costs. However, if international merchants were allowed to store fiber in bonded warehouses within Bangladesh and export from there, it would significantly reduce costs. This policy has been requested for the past 10-15 years but has not yet been implemented. If enacted, I believe our total costs would decrease by 7%-8%, providing substantial benefits to the spinning sector.
Textile Focus: What are your views on new investments in the spinning sector? What are your industry’s plans in this regard?
Md. Abul Kalam Azad: Currently, we are unable to fully utilize our production capacity due to the surge in yarn imports from India. News outlets like Prothom Alo,The Daily Star,Samokal and The business Standard have reported that yarn imports from India have increased by about 39% over the past 6-7 months. Additionally, the Indian government provides a 6% incentive on exports, making their yarn significantly cheaper. This has made it difficult for us to compete, leading to excessive yarn dumping in our market.
As a result, we have significantly reduced production and are still operating at a loss of around 25-30 cents per kilogram. Given this situation, there is no opportunity for new investments. If we can establish proper policies and the government thoroughly considers the issue of yarn imports from India, Pakistan, and Vietnam, our industry’s backward linkage sector will recover. This will also attract significant foreign investment into the sector.