Soaring production cost to put RMG industry at stake
Gas price hike24 January 2023
Staff Reporter :
The government, through an executive order, hiked prices of the retail piped gas in four consumer categories, including industries, by up to 179 per cent, with effect from February 1.
The steep gas price increase has come as a big shock for the ready-made garment (RMG) sector, since it would push up apparel manufacturing cost substantially and may erode competitiveness of Bangladesh's apparel industry in global arena.
"The gas price hike would have severe impact on the country's garment industry with cost of production to rise," Faruque Hassan, President of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), told The New Nation.
He said the apparel industry was struggling to stay competitive as the price of everything, like fuel, transport and raw material has already gone up. Meanwhile, the government has increased gas prices, meaning the cost of production will increase further. But buyers will not buy our products at high prices. Under this circumstance, we will have to sell our products at below the production cost.
The BGMEA leader further said that apparel industry was facing fierce competition from nations like, India, China, Vietnam and Cambodia. This competition was intensified since the beginning of the Covid-19 epidemic, with buyers constantly pressing for price cut.
"Thousands of orders have been cancelled and many apparel manufacturing units have closed down owing to the shocks of the pandemic," he said, adding, "Now, the ongoing Russia-Ukraine affects the industry further through the supply-chain shocks and escalating energy prices."
He also said that the pandemic pressure and geographical tensions have brought stiff challenges to the garment industry in Bangladesh. Right now, the sector needs policy supports from the government to overcome the challenges.
Faruque Hassan mentioned that many raw materials of the garment sector are now made in Bangladesh. If the price of gas increases, the price of these raw materials will also increase. It will also put more pressure on the industry. "We will see its direct impact on exports," he added.
Considering the fact, he appealed to the government to bring down prices to reasonable levels to protect the domestic apparel industry and employment. "If system losses are reduced there would be no need to increase the gas price. The authorities should take strict action against illegal gas connections."
Apparel industry is the mainstay of Bangladesh economy. Bangladesh is today world's second largest garments exporter after China, with the RMG sector accounting for 84 percent of Bangladesh's total exports. This comes on the back of the sector's rapid growth and modernisation over the past decade as well as the strides it has made in improving working conditions for the country's approximately four million garment workers.