Fund crisis, inherited debts major stumbling blocks

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Shortage in funds for raw materials, coupled with a crippling Tk 5,500 crore in accumulating debts over the years, have choked the country’s public- and private-sector jute mills.

Mills owned by the Bangladesh Jute Mills Corporation (BJMC) owe over Tk 5,000 crore, while privatised mills are struggling with around Tk 500 crore in mostly inherited debts.

The massive amounts keep banks from lending to most of these mills.

The government however pumps in some funds to the BJMC mills in phases to help them stumble along. Having no access to such lifeline, most of the private mills either shut down or were rented out.

Of the 38 jute mills privatised in 1982-83, owners rented out 17, seven are on the fritz and the rest, which were bundled with less debts at the time, are in operation, Abdul Barik Khan, secretary of Bangladesh Jute Mills Association (BJMA), said.

The BJMC has shuttered three of its 24 mills and leased out six more. The remaining 15 mills are running, according to a BJMC official.

This year the government has allocated only Tk 125 crore for the 15 mills to purchase raw materials when Tk 464 crore is needed to feed them, former BJMC chairman Ataharul Islam said.

The funds were released in the second week of September, way past the jute harvest. Then it may take a few months for the mills to complete purchasing jute.

The delay will add to the losses as the middlemen who are hoarding the jute harvest will sell their stockpiles at higher prices, experts and officials concerned said.

“Releasing the funds pretty late and in small amounts has been the norm for a long time. The government must change such bureaucratic snafu,” said an official at the jute and textile ministry.

The government has got to allocate required funds on time, set a target for each mill and make the mill authorities accountable, he said.

“The BJMC mills would not recover otherwise,” he added.

Khandker Golam Moazzem, a research fellow at the Centre for Policy Dialogue (CPD) who studied the jute industry, suggested gradual write-off of debts.

He said introducing private management at the state-owned jute mills will revitalise them by injecting efficiency.

The country grows about 55 lakh bales of jute on average, 40 percent of which are exported.

The mills produced 5.84 lakh tonnes of jute products in the past fiscal year. Experts said the industry could churn out around 8 lakh tonnes if all the mills were running and uninterrupted supply of power and raw materials could be ensured.

Export earnings from manufactured products and raw jute stood at $318.34 million and $165.06 million in the last fiscal, according to the Export Promotion Bureau (EPB).

The figures were $320.78 million and $147.15 million in 2006-07.

“There are much global demand for jute products, but we cannot meet it fully,” BJMA Chairman Najmul Huq said. “Unlike the garment sector, the jute industry adds 100 percent value to their products because you don’t need to import any raw materials.”

Former BJMA chairman Kamran T Rahman said the government gave more money to the state-owned mills than the privatised ones under the World Bank’s Jute Sector Reform Programme in the early ’90s.

Private-sector mills got government funds equivalent to 16 percent of their export earnings to recover from losses. The margin for state-owned mills was 31-67 percent and they got the cash for longer period, he said.

“This created a very uneven playing field,” he said.

Jute was once called the golden fibre; now it has become the diamond fibre because worldwide demand is on the rise, said jute expert Shah Alam.

But power cuts and unavailability of raw jute on time contribute to 50 percent and 40 percent of the losses for the state-owned mills in the Khulna region, he said.

Pointing to corruption, he said bureaucrats and politicians have long been on the make in the jute sector. If the stolen assets were recovered, the financial constraints could largely be overcome.

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