As textile mills and spinning plants in Bangladesh struggle to produce yarn, fabric and garment manufacturers are forced to look elsewhere to meet the demand.

Data from Bangladesh Bank showed that the garment industry imported yarn worth $2.64 billion during the July-April period of the just-ended fiscal year, while imports in the same period of fiscal 2023 were $2.34 billion.

The gas supply crisis has also become a key factor in the situation. Typically, garment and textile factories require gas pressure of about 8-10 pounds per square inch (PSI) to operate at full capacity. However, according to the Bangladesh Textile Mills Association (BTMA), the air pressure drops to 1-2 PSI during the day, severely affecting production in major industrial areas and even lasting into the night.

Industry insiders said the low air pressure has paralyzed production, forcing 70-80% of factories to operate at about 40% of capacity. Spinning mill owners are worried about not being able to supply on time. They admitted that if spinning mills cannot supply yarn on time, garment factory owners may be forced to import yarn. Entrepreneurs also pointed out that the reduction in production has increased costs and reduced cash flow, making it challenging to pay workers’ wages and allowances on time.

Garment exporters also recognise the challenges faced by textile mills and spinning mills. They point out that disruptions in gas and power supply have also severely affected the operations of RMG mills.

In Narayanganj district, gas pressure was zero before Eid al-Adha but has now risen to 3-4 PSI. However, this pressure is not enough to run all machines, which affects their delivery times. As a result, most dyeing mills are operating at only 50% of their capacity.

According to a central bank circular issued on June 30, cash incentives for local export-oriented textile mills have been reduced from 3% to 1.5%. About six months ago, the incentive rate was 4%.

Industry insiders warn that the readymade garment industry could become an “import-dependent export industry” if the government does not revise its policies to make local industries more competitive.

“The price of 30/1 count yarn, commonly used to make knitwear, was $3.70 per kg a month ago, but has now come down to $3.20-3.25. Meanwhile, Indian spinning mills are offering the same yarn cheaper at $2.90-2.95, with garment exporters opting to import yarn for cost-effectiveness reasons.

Last month, BTMA wrote to Petrobangla Chairman Zanendra Nath Sarker, highlighting that the gas crisis had severely affected factory production, with supply line pressure at some member mills falling to near zero. This caused severe machinery damage and led to disruption in operations. The letter also noted that the price of gas per cubic metre had increased from Tk16 to Tk31.5 in January 2023.