Industries face four different crises

The regular import of raw materials is essential to continue industrial production. Business persons normally pay import costs at banks two to six months after import of the raw materials as per condition of their letters of credit (LC).

They are now paying import bills against the LCs that were opened when the dollar exchange rate was at Tk 86. In May, they repaid the credit after buying the greenback at Tk 94 to 95. But they are now counting Tk 109 per dollar to repay the bank loans, which eventually is skyrocketing their import costs.

The industrial sector encountered yet another crisis in July – load shedding. Adding to the woes, another crisis came to the fore – low pressure of gas. These two crises jointly decreased production around 10 to 50 per cent in the industrial sector.

Uncertainty in opening LCs due to instability in the dollar market is the latest addition to the woes as it slowed down import of raw materials considerably.

All these four crises hit production in all factories, including steel, cement, ceramics, glass, and other heavy export-oriented industries.

Meanwhile, the readymade garment factories that bring in the highest export revenue, are receiving fewer purchase orders for the next autumn and summer season. The buyers are even asking the manufacturers to delay the shipment of the ongoing purchase orders.

The country’s industrial sector never faced such an overwhelming number of crises before.

The President of the Federation of Bangladesh Chamber of Commerce and Industry (FBCCI) Jashim Uddin said industrial production has declined as fuel costs increased globally. higher production means higher costs.

“We requested the government to give priority to the industries while rationing power, but this did not happen,” he said, adding that load shedding is taking place in both homes and factories in a similar fashion.

The FBCCI boss further said, “We feel that this needs a little amendment. And gas pressure is quite low, affecting the gas-fired industries. Proper gas supply needs to be ensured. Load shedding and low gas pressure – these two issues should not coincide.”

All four crises more or less exist in the steel industries. Leading steelmaker BSRM witnessed a 30 per cent fall in its billet production from scrap iron and a 10 per cent fall in rod production due to the crisis of gas and power.

Due to low-pressure of gas, the company is increasingly using furnace oil which has hiked production costs significantly, said BSRM Group deputy managing director Tapan Sen Gupta.

Mostafa Hakim Group has two automatic rod factories in Sitakunda and Karnaphuli upazilas of Chattagram, with a production capacity of 1,600 tons per day.

These factories registered a 40 per cent drop in production recently due to load shedding since the third week of last month and subsequent low pressure of gas. Production now remains suspended for a shift at both the factories every day. The factories now require extra 2-3 hours to go into production every day, which led to cost rise.

Sarwar Alam, director of the Mostafa Hakim Group, told Prothom Alo that they are struggling to meet the import costs and have been forced to decrease production. On the other hand, it takes three to four-fold higher time to open a LC for importing raw materials.

Bangladesh imports all five raw components of cement, but import slowed down recently in the face of decreased demand. The industry registered an 8 per cent fall in raw material import in the fiscal year 2021-22.

The recent power crisis curbed cement production further.

The high dollar price turned out to be the biggest problem for cement industrialists as they are spending up to an additional 20 per cent each month to meet the import costs.

Alamgir Kabir, president of the cement manufacturers association, told Prothom Alo that he has been doing cement business for the last 35 years, and has never seen such an uncertainty over dollar.

He expressed fear that the import in this sector will decrease further if the dollar crisis is not resolved.

In the glass industry, raw materials are melted in furnaces at a temperature of 1,600 degrees Celsius. Gas is essential for this industry. If production stops due to lack of gas, the furnaces are destroyed.

The glass factories are now struggling to keep the furnaces burning due to low gas pressure since last month. Four factories including PHP Float Glass in Chattogram, Nasir Float Glass in Dhaka, have the capacity to produce 500,000 tonnes of glass per year. They are also exporting glass after meeting local demands.

However, the glass factories are now struggling to retain production due to the gas crisis.

The production the PHP Float Glass Industries factory fell from 240-250 tonnes to 170-180 tonnes. The authorities want to keep production rolling at any cost to save the furnaces.

Amir Hossain, managing director of PHP Float Glass Industries, said, “We have not given up even though the production has decreased remarkably. This industry thrived with government support. We are hopeful that this crisis will be over soon.”

Outpace Spinning Mills at Maona in Gazipur has a production capacity of 45 tonnes of yarn per day. They have their own captive power generation system, in addition to regular power connection from Pally Bidyut Samity.

However, the low gas pressure slowed down the daily yarn production to around 4 to 7 tonnes at the factory and also pushed up the production costs.

Its managing director Rajeev Haider told Prothom Alo that the daily yarn production decreased by 10-15 percent per day at the factory due to low gas pressure. The problem turns acute from 6:00pm to 9:00pm.

Other factories are also suffering from power cut and gas crisis, which translated into a production fall of up to 50 per cent.

According to traders, production costs go up whenever production volume is low. There are also less purchase orders from buyers. As a result, products are piling up.

Sadia Textile Mills in Tangail is runs fabric production and dyeing. Its dyeing unit registered a 20 per cent fall in production due to low pressure of gas. A good amount of fabric is also damaged due to the low gas pressure.

However, the fabric production remained uninterrupted due to electricity connection from Palli Bidyut Gridline.

Abdul Wadud Chowdhury, managing director of Sadia Textile said, gas pressure remains low from evening to 2:00am.

Vice president of Bangladesh Textile Mills Association (BTMA) Mohammad Ali said they have to pay gas and electricity bills, labour wages, and bank interest regularly. This is why costs increase and fear of loss arises whenever production is low.

The overall production fell by 30 per cent and it may force the entrepreneurs to count losses, he added.

The ongoing crisis also hit the ceramic companies as the power crisis and low gas pressure decreased their production up to 60 per cent. Besides, the high dollar price pushed up their raw materials import costs and production costs.

Now, they are mulling increasing product prices to cope up with the current situation.

Mustafizur Rahman, special fellow of the Center for Policy Dialogue (CPD), said import substitution industries are also important like the export sector as saving one dollar is equal to earning it.

In the current context, there is a need to give priority to gas and electricity supply to industries and help in opening LCs. Importers have to buy dollars at higher prices. Imports fell last July while dollar and export earnings increased, which put the reserves under pressure, he said.

The economist also noted that Bangladesh Bank is selling USD60 to 70 million per day to import commodities. It may also sell dollars to import raw materials for industries.

Mustafizur also said that over invoicing and under invoicing should be stopped to prevent money laundering in import and export in the current crisis. It is also necessary to ensure that remittances enters the country through the banking channels.

There is still a big gap between the dollar prices of banks and the open market. It is very important to take the dollar exchange rate to a comfort zone, he added.