Textile millers oppose scrapping 30% value-addition rule

Textile millers have urged the government not to withdraw the 30 percent value-addition requirement on imports of garment raw materials such as yarn, warning that the move could harm the domestic primary textile sector.

The withdrawal would encourage garment exporters to import yarn instead of sourcing it locally, potentially flooding the domestic market with imported products, they said.

In its proposed budget for FY2026-27, the government has proposed scrapping the 30 percent value-addition requirement in the domestic market to facilitate business operations.

If implemented, the measure could undermine the primary textile sector, which has attracted investments of around $23 billion, said Showkat Aziz Russell, president of the Bangladesh Textile Mills Association (BTMA), at a press conference held at the Gulshan Club in Dhaka yesterday.

He said the proposal runs counter to efforts to preserve the country’s competitiveness and sustain local industry ahead of Bangladesh’s graduation from the Least Developed Country (LDC) category.

Citing various studies, Russell said Bangladesh could lose $17.5 billion in exports, mainly apparel shipments, following LDC graduation. He also said that 114 of the 234 spinning mills owned by BTMA members had shut down since 2019.

The remaining mills are operating at only 60 percent to 70 percent of capacity due to inadequate gas supplies and the growing dominance of lower-cost Indian yarn in the domestic market, he added.

According to BTMA data, imports of Indian cotton yarn rose 22.07 percent year-on-year to $1.79 billion in FY2024-25, with import volumes reaching 556.12 million kilograms.

In FY2023-24, imports of Indian cotton yarn stood at $1.48 billion, with volumes of 455.57 million kilograms, registering annual growth of 1.04 percent, the association said.

Russell said Indian suppliers are able to offer yarn at lower prices because of extensive government support.

He said the Indian government also provides a 15 percent capital investment subsidy, an 8 percent interest subsidy, infrastructure support, and 15 percent assistance for technology upgradation and modernisation.

Another concern is the risk of supply disruptions, he said, noting that Indian exporters may prioritise other markets without prior notice.

Russell cited a recent instance when India increased yarn exports to China, leaving Bangladeshi importers facing shortages and higher prices as local demand surged.

In the post-LDC era, Bangladesh may need to meet double-transformation requirements to retain trade benefits, which would require greater use of locally produced yarn, he said.

Therefore, the capacity of domestic spinning mills and the broader primary textile sector should not be reduced, particularly when the country needs to strengthen preparations for LDC graduation, he added.

Russell also urged the government to reduce the corporate tax rate for primary textile mills to 12 percent from the current 27.5 percent and maintain the rate until 2030 to attract more foreign direct investment.

He argued that the existing tax rate is discriminatory, as export-oriented non-green garment factories are taxed at 12 percent, while green garment factories enjoy a 10 percent rate.

The reduced 15 percent tax rate previously enjoyed by primary textile mills expired on June 30, 2025, after being introduced in 2015.