Business leaders in Bangladesh's textile and garment sector have raised concerns over the recent gas price hike, citing its impact on the already struggling industry. They highlighted ongoing stagnation in garment exports, rising production costs, and disruptions in both import and export activities, particularly before and after the July Revolution. Additionally, they pointed to the pressures of global inflation, banking crisis, labor unrest, and security challenges, all of which have hindered production and disrupted supply chains.
They said that the government may decide to raise the gas price for the industrial sector by nearly 150%, bringing it to 75 Taka per cubic meter. If this price hike is implemented, it could have long-term negative effects on both industrialization and the economy. The additional annual cost would amount to 17,975 crore Taka.
In light of this, they have called for the suspension of the planned gas price increase and urged the formulation of a policy to determine a competitive and sustainable price through discussions with stakeholders.
Annual expenditure to rise by 17,975 crore Taka
According to the Ministry of Energy and Mineral Resources, Bangladesh's total gas supply for the 2023-24 fiscal year was 25,947 MMCM, with 18% allocated to the industrial sector. The textile industry alone accounts for nearly 30% of industrial gas usage, with an annual demand of approximately 1,400 MMCM.
A price increase of 45 Taka per cubic meter would raise costs by an additional 6,300 crore Taka annually, or about 1.5% of export revenues.
Furthermore, textile industry captive power plants consume around 10% of the nation’s total gas supply, approximately 2,595 MMCM per year.
A 45 Taka increase would result in an additional 11,675 crore Taka in costs for these plants, which represents about 2.7% of annual garment export revenue.
Such a significant rise in costs could exceed the industry's capacity, threatening its competitiveness in international markets.
Investment Stagnation in Textile and Garment Sector
According to Bangladesh Bank statistics, imports of capital machinery for the garment sector declined by 8.95% and for the textile sector by 18.11% between July and November of the current fiscal year (Attachment-4). A gas price hike would have a detrimental impact on investments and further strain existing mills and factories. At a time when investment in backward linkages is essential for Bangladesh’s transition to a middle-income country, such a move would undermine investment growth.
Entrepreneurs emphasize that the textile and garment industries are crucial to Bangladesh's economy, driving industrialization, employment, foreign exchange reserves, social development, and women’s empowerment. Thus, the sector's stability is vital for overall economic stability.
Production costs in the sector continue to rise, with the minimum wage for garment workers increasing by 56% in December 2023 and a 9% annual increment implemented in December 2024.
Over the past five years, gas prices have surged by 286.5%, electricity by 33.5%, diesel by 68%, and bank loan interest rates by 14-15%. Consequently, overall factory production costs have risen by nearly 50%.
Amid these challenges, export cash incentives for the local garment sector have been slashed from 4% to 1.5%.
Additionally, import and export activities have been disrupted before and after the July Revolution. The banking sector crisis, labor unrest, and security issues have hindered industrial production and caused a breakdown in the supply chain.
According to the United Nations Conference on Trade and Development (UNCTAD) Global Trade Update report, global apparel imports declined by 5% in 2024, negatively impacting Bangladesh's industry, particularly its export value. Compared to the previous year, from January to November 2024, the value of garments imported from Bangladesh has decreased by 4.24% in the United States and by 4.83% in the European Union.
In this context, Showkat Aziz Russell, President of the Bangladesh Textile Mills Association (BTMA), told Bangladesh Pratidin that while the textile and garment sector had just begun to recover from the impacts of the COVID-19 pandemic, it is now facing new challenges due to the Russia-Ukraine war, conflicts in the Middle East, and global inflationary pressures. Although there has been recent positive growth in garment exports, the sector is experiencing stagnation when compared to the growth of the past three fiscal years. This stagnation raises concerns about the long-term sustainability of economic growth.
In response to the situation, business leaders have called for the immediate suspension of the planned gas price hike for the industrial sector and captive power plants. They urge the creation of a policy, in collaboration with relevant stakeholders, to set a competitive and sustainable gas pricing model. To address the current gas shortage in the industrial sector, they have proposed urgent measures, such as providing gas to factories through cylinders from CNG stations. Additionally, they have recommended the development of medium- to long-term strategies to ensure a reliable and uninterrupted gas supply.
These proposals have been presented to Muhammad Fouzul Kabir Khan, Adviser to the Ministry of Power, Energy, and Mineral Resources.
Translated by ARK/Bd-Pratidin English
