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Changed EU RoO lead to fall in local yarn & fabric sales
May '11
High imports has led to a substantial decline in the sale of yarn and finished fabric in the first quarter (Q1) of 2011. The chief reason cited for decrease in yarn sales is the availability of yarn at cheaper prices from countries like India.

According to Jahangir Alamin, President of Bangladesh Textile Mills Association (BTMA), the decline in sales of finished fabric was chiefly due to imports from China.

Earlier the apparel makers enjoyed duty-free access to the European Union when they purchased from the local mills. However, some changes have come into effect from January 2011 in the EU Rules of Origin (RoO) under the Generalised System of Preferences (GSP). This has enabled the buyers to get the same zero-duty facility from imported fabric.

The EU has relaxed the RoO for the least developed countries (LDCs) like Bangladesh enabling the local garment manufacturers to import fabric from countries like China. The relaxation of the RoO has led to an increase by 88 per cent in the import of finished fabric during Q1.

The BTMA President added that a total of 356 spinning mills in Bangladesh produce 3,000 tonnes of yarn a day for local consumption. However, all of this is not being sold and hence stockpiles are increasing day-by-day.

As a result, 30-count yarn which sold at US$ 7 per kilogram a month ago is now being sold at US$ 5. The spinners cannot afford to sell yarn at any further lower price as they had purchased cotton at higher prices the previous year.

Hence, the BTMA has asked the Government to either increase the cash incentives to 15 per cent from the existing 5 per cent, or set higher duties to discourage imports. The first option, however, is being opposed by Bangladesh Knitwear Manufacturers and Exporters Association and Bangladesh Garment Manufacturers and Exporters Association.

Abdul Latif Siddiqui, Minister for Jute and Textiles, Government of Bangladesh has said that the 88 per cent increase in import of fabric is alarming, but added that the situation is temporary and the country's spinning sector would not be affected.

The Minister also said that the Government will not increase the cash incentive in the near future by saying “I do not think the time has come to give any stimulus package for the survival of the spinning sub-sector.”

Fibre2fashion News Desk - India

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