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12 days ago

Unlocking ceramic industry's potential

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Ceramic products have undergone a remarkable transformation in recent years. Once viewed as a luxurious addition to a home or building, they have become a must-have for many consumers. This shift is driven by a growing appreciation for the unique benefits ceramics offer, particularly in the areas of hygiene, aesthetics, and durability.

Driven by increasing demands, the Bangladeshi ceramic industry has experienced remarkable growth in recent decades. Prior to 2000, the country relied heavily on imports, spending significant foreign currency to meet over 80 per cent of its ceramic product needs. Today, a thriving domestic industry caters to over 85 per cent of local demand, with the size of the local ceramic market estimated at around Tk 80 billion.

Comprised of 70 companies with a combined investment of Tk 170 billion, the local ceramic sector is a significant job creator, employing roughly half a million people directly and indirectly. These companies not only cater to local demands but also contribute to foreign exchange earnings, with Bangladeshi ceramic products reaching over 50 countries.

However, it is disheartening that the ceramic industry is now facing a huge challenge due to a severe gas crisis. According to a report published in this paper, factories across key production hubs like Dhaka, Gazipur, and Narsingdi are struggling to maintain operations due to a critical shortage of natural gas, a vital ingredient in the ceramic manufacturing process.

Industry estimates suggest that nearly 25 ceramic factories in the affected areas are facing a daily production loss of Tk 200 million as a consequence of the erratic gas supply. This disruption threatens the competitiveness of local manufacturers in both domestic and international markets. The Bangladesh Ceramic Manufacturers & Exporters Association (BCMEA) has urged the government to take immediate action to ensure uninterrupted gas supply for these factories.

It is worth mentioning that ceramic production relies heavily on natural gas, which accounts for 10-12 per cent of the total production cost. Ceramic kilns require a constant gas supply pressure of 15 psi (pounds per square inch) for 24 hours to properly fire the products. However, the current gas pressure in affected areas fluctuates between 0 and 3 psi, rendering production impossible.

The consequences of this crisis extend far beyond production stoppages. When gas supply is interrupted suddenly and some products remain incomplete within kilns, those products become unusable. Moreover, restarting a kiln after a halt takes 48-72 hours, further impacting production efficiency. The problem has become so acute that industry insiders fear that gas crisis could potentially lead to loan defaults by ceramic factory owners.

The crisis is most severe in the northern region of Dhaka, where many factories are concentrated. The industry owners have recently accepted the gas price hike from Tk 13 to Tk 30 per cubic meter with the hope of improved supply, but in vain. Shifting to liquefied petroleum gas (LPG) cylinders is also not a viable solution, as it would significantly increase production costs, making Bangladeshi ceramic products less competitive in the market.

Local industries have been facing gas crisis for an extended period, a situation that hinders their ability to operate efficiently. The government began importing liquefied natural gas (LNG) in late 2018 to address the domestic supply shortfall. LNG import, however, was complicated by the Russia-Ukraine war, which triggered a dramatic surge in global gas prices. This forced the government to temporarily halt purchase of LNG from the international spot market. In recent months, however, global LNG prices have declined to some extent, but experts think the long-term solution to gas crisis lies in domestic gas exploration and infrastructure development.

Despite the ceramic industry's amazing growth over the years, export earnings from this sector remain modest, totalling only $43.39 million in FY23. Industry insiders believe the sector holds immense potential to replicate the success of Bangladesh's Readynade Garments (RMG) industry and become a major export earner. They emphasise the need for policy support on a par with the RMG sector to unlock this potential.

Apart from ensuring a stable gas supply, industry leaders are also calling for the removal of the supplementary tax on ceramic tiles, arguing that ceramic products have shifted from being luxury items to essential goods. Currently, ceramic tiles face a supplementary duty of 15 per cent, while sanitary products incur a 10 per cent duty. In addition, the industry bears more than 30 per cent in other duties and expenses. They advocate for the withdrawal of these duties, arguing that the cost of all construction materials, including steel and cement, has risen. Removing the supplementary tax would enable ceramic products to be sold at lower prices, boosting sales and ultimately increasing government revenue.

As Bangladesh approaches its graduation from Least Developed Country (LDC) status in 2026, diversifying its export basket is no longer an option, but a vital imperative. A diverse export portfolio acts as a key engine of economic growth as well as a shield, insulating the economy from sudden drops in demand for specific sectors.

Currently, Bangladesh relies heavily on the Readymade Garment (RMG) sector, which contributes over 84 per cent to its export earnings. Should this sector encounter difficulties due to unforeseen changes in the international market, it could destabilise domestic income and employment levels. In this context, the ceramic sector holds immense potential to contribute to a more diversified export landscape.

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