2 years ago

Hike in prices of fuel oils

RMG sector may face fresh blow

Trade bodies demand keeping them out of the purview of fuel price hike

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The readymade garment (RMG) and its associated industries, including accessories makers, are set to face a fresh blow due to the latest price hike of fuel oils.

The hike came at a time when the country's largest foreign currency earning sector started receiving lower work orders and opened the fiscal year's account in July with slow export earnings growth, the industry leaders said.

"The cost of production will increase, putting a negative impact on the RMG sector due to the price hike. Certainly we would lag behind achieving the export target set for the FY 2022-23," said a statement issued on Saturday by the Chattogram office of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA).

The government has set a target to earn US$58 billion through goods export, including more than 80 per cent or US$46.80 billion from RMG, in the current fiscal year.

According to the statement, the factories were operating on fuel oils due to the ongoing electricity load-shedding. As a result, the production cost went up significantly in recent times, but the prices of apparel items are not increasing in the global market.

AKM Salim Osman, President of Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), in a separate statement said: "We are shocked at the unusual rise in fuel oil prices here in the country when the prices are falling in the global market. Such a decision of hike would put the export-oriented industries in difficulty."

BGMEA is the apex body for more than 4,000 woven and sweater manufacturers while BKMEA the trade body of some 2,000 knitwear makers, contributing 54.47 per cent and 45.52 per cent respectively to the total US$42.61 billion in RMG exports in the last FY.

The apparel sector trade bodies expressed the concern a day after raising the prices of fuel oils with effect from Friday midnight.

"The decision would directly affect electricity generation, transportation and other sub-sectors which would ultimately erode the competitiveness of the knit sector," Mr Osman said.

He suggested that the government should immediately sit with the stakeholders concerned urgently and devise sector-wise alternative plans.

"We are yet to fully recover from the pandemic shock that has slowed the growth of the global economy. Moreover the ongoing Russia-Ukraine war resulted in a negative impact and moving towards a possible global economic recession," he noted.

There has been a disruption in the global supply chain which has also affected the local RMG industry.

Water, electricity, gas and workers are the major local elements while the rest are imported for export activities, he said, adding that any disruption in the local supply chain would adversely impact the industry.

The exporters are under 'tremendous pressure' due to multiple issues including shortage of gas and its recent hike, rise in source tax to 1.0 per cent from 0.5 per cent in the current fiscal, and last year's electricity price hike, the BKMEA president added.

Despite all those, production activities would face certain pressure due to the latest rise in prices of fuel oils, he said, adding that they are worried over sustaining the competitiveness of the sector.

"To face the economic burden, the government should increase the cash incentive rate as an urgent basis for the time being," Mr Osman said, demanding business-friendly policy support.

BGMEA first vice president Syed Nazrul Islam, in the statement, expressed deep concern, saying that the wage payment of workers might face difficulty or delays, resulting in labour unrest and anarchy in the sector.

The global economy is in uncertainty and a volatile situation due to the confrontational stance between the US and China over the Taiwan issue amid the Russia-Ukraine war, he said.

He urged the government to keep the export-oriented RMG and its other related industries out of the purview of fuel price hike to help sustain the export growth for the greater sake of the economy.

Talking to the FE, Abdul Kader Khan, former president of Bangladesh Garment Accessories and Packaging Manufacturers and Exporters Association (BGAPMEA), said that they are also facing power cuts daily and running factories with diesel-based generators.

With the rise in the fuel prices, transportation cost went up by 40 per cent on Saturday, he noted.

According to the BGAPMEA, some 1,800 factories were registered with the association and they meet more than 95 per cent of the RMG sector's requirements for accessories.

They made deemed exports worth US$7.0 billion in fiscal year 2020-21 which was $2.75 billion in FY 2010-11.

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