Tuesday, 11 June 2013
A move is afoot to establish a 'cotton hub' in Bangladesh so that millers can get this basic raw material at a short notice, sources said. The National Board of Revenue (NBR) is scrutinising a proposal, placed by local company Golden Harvest Group which is agent of Louis Dreyfus, a giant global trader of bulk agricultural commodities.
Under the proposal, the Sena Kalyan Sangstha will set up warehouses on its lands where several global raw cotton traders will stockpile their goods. The warehouses will be considered as 'special zones' from where buyers will be able to get cotton through opening letters of credit (LC) or cash against documents (CAD). Officials said the ministry of commerce (MoC) is in favour of setting up the proposed 'cotton hub' since the country's textile sector faces complications when cotton prices fluctuate frequently in the global market.
Bangladesh is the second largest global cotton importer after China with yearly average import of 3.7 million bales of cotton. The country imports cotton mainly from India, nearly 0.9 million bales a year, and also from Africa, America, Australia, Pakistan, and Commonwealth of Independent States (CIS).
Bangladesh is now negotiating with India for getting supply of 1.5 million bales of cotton every year. The move is going on, in view of India's frequent ban on cotton supply that poses a major operational problem to the Bangladesh textile industry.
Chief Operating Officer (COO) of Golden Harvest Commodities Ltd Azizul Huq told the FE Sunday that various global cotton traders would put the item in the hub from where millers would be able to buy quickly.
He said cotton stock for a period up to three months will always be available in the hub to meet the domestic demand. "Millers who will buy cotton from there will be able to avoid paying interest charges to the banks for a long term as well as overcome the problem of time constraints." Mr Huq said countries like China, Turkey, and Malaysia have allowed establishment of such hub, facilitating their millers to get raw material quickly.
"Since demand for cotton in Bangladesh is very high, top global traders will be interested to keep their products here," he added. A top official of Sena Kalyan Sangstha said they are waiting for approval of the proposal of the MoC. He said the NBR is taking much time in the name of scrutiny of the proposal. "The country will definitely be benefited if a cotton hub is set up," said the official.
President of Bangladesh Textile Mills Association (BTMA) Jahangir Alamin, however, said people who have taken the initiative are yet to consult with the stakeholders over the issue. "The MoC sought our opinion in this regard.
But we are still not clear what their (Golden Harvest Group and Sena Kalyan Sangstha) motive is. So, we opposed such an initiative." Mr Alamin said after getting permission for large-scale cotton import, they may also seek permission to import yarn and fabrics.
"That will put our local industry at risk. So, we requested the government not to open the Pandora's box." He said local millers are not facing any problem under the present sustem for procurement of cotton by following the existing import procedures.
President of Bangladesh Cotton Association Muhammad Ayub said the move is welcome if they can provide cotton at competitive prices. "We welcome the move since cotton will be available quickly and local millers will be able to avoid paying interest charges on bank loans," he said. (Source: The Financial Express)