Bangladesh SMEs grapple with uncertainty as yarn imports via land are suspended

An NBR official confirms that the government is not considering a review of the current suspension

The interim government's decision to suspend yarn imports from India via land borders—following pressure from domestic mills eager to expand their market share—has left small and medium enterprises (SMEs) jittery.

Many fear the move could erode their competitiveness in the export market, tightening access to affordable raw materials and threatening their foothold in global supply chains.

Stakeholders believe the government’s decision will hit the small and medium businesses hard in the knitwear sector, especially those who import yarn from India at low prices by land against small purchase orders.

Moreover, some worry that it will allow domestic mills “syndicate” to get stronger.

Leaders of business organisations have sought a review of the decision by the National Board of Revenue (NBR), who made the decision public on Tuesday.

Kazi Mostafizur Rahman, in charge of audit, modernisation and international trade at the NBR, told bdnews24.com: "No review is being held."

Under the retracted order issued on Aug 29, 2024, 100 percent of export-oriented industries with customs bond licences were allowed to import yarn via these land ports. Imports through land ports were still restricted for other businesses.

With the latest order, the NBR imposed a blanket ban on all yarn imports via the land ports.

Previously, yarn imports from India were only routed through five land ports, including Benapole, Bhomra, Sonamasjid, Banglabandha and Burimari.

COMPLAINTS ON HIGH-COUNT YARN

The biggest buyers of yarn in Bangladesh are the ready-made garment and textile sectors. Alongside imports, they meet their demands through domestic mills as well.

The maximum count of yarn used in the ready-made garment sector is 30 to 32. Depending on the type of fabric to be made or the purpose for which it will be used, the count helps determine the quality of the yarn.

The yarn count is set at a maximum of 100 with the number indicating the weight and quality of yarn. The higher the number, the more the weight and thicker the yarn.

The Ministry of Commerce has stopped importing yarn from India through land ports at the request of the Bangladesh Textile Mills Association (BTMA).

Bangladesh garment sector received a huge portion of yarns through import from India, mostly through the Benapole port.

Indian traders used to store yarns manufactured in the northern and southern regions in Kolkata, and from there it used to be transported to by land.

The price of these yarns coming through Benapole port was lower than the price of yarns coming through sea ports. And the BTMA had been complaining that the low-priced yarns had been detrimental to the domestic textile mills.

Why not import yarn from India if it is available at a lower price, BKMEA President Mohammad Hatem has asked.

BTMA, however, has presented two reasons in favour of the NBR’s decision.

The first is to protect domestic mills; the second is that 60 count and even 80 count yarns are being imported in the name of low count yarn, although high count yarns are not used in the ready-made garment sector. Those yarns arrive in Bangladesh for use in the domestic market.

The ready-made garment sector gets back-to-back letters-of-credit facilities for yarn imports. So, these yarns imported for use in export goods are duty-free. Only customs charges have to be paid.

Another reason the BTMA presented for opposing the import is that the entry of yarns “in excess of the LC declaration” into the country’s market was harming the government and domestic mills.

According to government and commercial organisations, the amount of yarn imports into Bangladesh had gone up over the past few years.

BTMA data says Bangladesh imported 1.21 million tons of yarn from India last year, which is 31.45 percent more than the previous year. In 2023, the imports were 924 thousand tons.

On the other hand, data published by the Indian Ministry of Commerce and Industry says the country exported over $1.30 billion worth of yarn to Bangladesh in the 2023-24 fiscal year, which was 34.57 percent more than the previous fiscal year.

In the 2023-24 fiscal year, yarn worth $971.6 million came from India. According to Bangladesh Bank data, in that financial year, Bangladesh imported a total of $2.93 billion worth of yarn from different countries.

Faruque Hassan, former president of Bangladesh Garment Manufacturers and Exporters Association (BGMEA), has pointed to a cut in incentives for the textile sector as a reason for the rise in yarn imports from India last year.

Speaking to bdnews24.com, he said: “The government reduced incentives for the textile sector from 4 percent to 1.5 percent, which lowered the competitiveness of local mills in terms of yarn prices.

“In addition, gas prices have increased several times, raising production costs.”

He also noted that Bangladesh’s garment exports have grown, resulting in increased demand and subsequently higher yarn imports from India.

ENTREPRENEURS PRESENT COUNTERARGUMENTS

The textile and knitting mills import cotton to produce yarn for the ready-made garment sector.

Most of the cotton required for the country comes from India.

Alongside its own production, India also exports cotton to Bangladesh sourced from Turkmenistan, Afghanistan, and Uzbekistan.

India had stopped exporting yarn to Bangladesh through land ports in 2011.

Later, due to persistent efforts from Indian traders, land port-based exports were resumed for Bangladesh.

According to BKMEA President Hatem, Indian traders can offer yarn at 30 cents (equivalent to Tk 36.60) less per kg than local mills, prompting entrepreneurs to prefer imports from India.

“We can save up to Tk 500,000 per lot. Why shouldn’t we import? We have to remain competitive in business,” said the businessman.

He added that if domestic mills could offer yarn at that rate, he would have no objection to buying locally.

“Most yarn comes via sea route, and there’s no issue there. We get it cheaper than local mills, who should be the ones offering competitive rates by increasing their capacity,” Hatem said.

Mohammad Ayub Hossain, an advisor to the Bangladesh Cotton Association (BCA), said: “Bangladesh doesn’t produce cotton—it’s entirely imported.

“India, on the other hand, has its own cotton and lower gas prices. That’s why their production cost is lower and they can offer cheaper prices.

“In Bangladesh, both transport and production costs are higher.”

He noted that yarn prices do not remain high at all times.

“Like daily commodities, yarn prices fluctuate,” Ayub added. “When demand rises, prices go up; when demand falls, prices drop.

“If you average the rates over a year, the difference isn’t significant—around 10 to 20 cents.”

The apparel export sector in the country includes small, medium, and large companies, with small and medium ones making up the majority in terms of numbers.

Buyers often place small orders on short notice, which mostly go to these smaller factories.

In business terms, the competition revolves around who can deliver the goods faster—who has the shortest lead time.

Small and medium-sized factories in Bangladesh have long relied on importing yarn from India by road, adjusting shipments to match immediate production needs.

Trucks carrying seven to eight tonnes of yarn typically pass through land ports, offering a practical and efficient solution for manufacturers.

This facilitates faster processing of letters of credit (LCs) and allows entrepreneurs to secure bank financing with relative ease.

Mohiuddin Rubel, a former director of the BGMEA, expressed concern over the government’s recent decision to stop yarn imports via land routes.

He warned that such a move could disrupt operations for smaller firms.

“Small companies become medium-sized, then dream of becoming big. Today’s big companies were once small,” Rubel told bdnews24.com.

“Now the problems of small and medium-sized companies have increased, their competitiveness has decreased, and lead time has decreased.”

The government has announced that all yarn imports must now arrive by sea or air.

While sea transport may reduce costs, it necessitates importing in bulk, which increases the financial burden and extends the time required for delivery.

Rubel noted that this change could impact the country’s export competitiveness.

“The reduction in lead time means that buyers will calculate how much time Bangladesh can deliver. If someone can deliver in less time, the order will go to them,” he said.

“In this way, a part of the export order may be lost.”

WHAT IS THE PROBLEM WITH LAND PORTS?

There is currently no functional machinery at Bangladesh’s land ports to verify the quality of yarn during import.

A yarn-counting machine, previously provided by the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), has reportedly broken down, leading to discrepancies between declared and delivered yarn counts.

Hatem said: “If there is a problem with measuring yarn, BKMEA will buy a counting machine. The land port can measure the yarn with that machine and see how many counts of yarn have been brought. Then there is no problem.

“But stopping imports is not a solution to the problem.”

He argued that land-based imports should remain an option for manufacturers, alongside shipments by sea.

“We have to keep alternative options open. There needs to be multiple options in imports,” he said.

According to the BTMA, the cost of yarn imported through Benapole land port is lower than that of yarn shipped through seaports.

The association submitted a formal letter to the Bangladesh Trade and Tariff Commission presenting this position.

In response, the Ministry of Commerce issued a directive to all land ports, citing the price disparity between yarn imported from India via land and yarn sourced from China, Turkey, Uzbekistan, or domestic producers.

Although prices from these regions are largely similar, Indian yarn delivered through land routes is significantly cheaper.

This pricing gap, the ministry noted, has put domestic yarn producers at a disadvantage.

Yarn brought in through land ports reportedly arrives at rates far below those declared at the Chittagong Custom House, making it harder for local manufacturers to remain competitive.

Despite repeated efforts, BTMA President Showkat Aziz Russell could not be reached for comment.

Phone calls went unanswered, and follow-up messages via SMS and WhatsApp elicited no response.