Large groups are planning business in jute
A number of big business conglomerates have stepped up to take over closed state-run jute mills to take advantage of growing export potentials.
Pran, Bay and Akij are among the big names looking to invest in such jute mills, while two jute mills from India and one from the UK are also in the running, according to sources from the Textiles and Trade Department. jute.
Twenty-four companies were competing to lease 14 of the 17 factories put out to international tender.
Imran Ahmed, Deputy Secretary of the Textiles and Jute Ministry, said that high profile businessmen aside, new entrepreneurs have shown interest in joint ventures, which is very promising.
“We expect the factories to be operational under private management early next year if the rental process is completed by September-October this year,” he added.
The state-owned factories, closed after years of losses, will be leased initially for 5 to 20 years and there will be options to expand them later.
Akij Group already has a strong presence in the jute trade, while Pran is willing to enter the sector as a new player and the group will lead its activities by forming a joint venture with other jute mills.
Eleash Mridha, Managing Director of Pran, told The Business Standard: “We export a lot of potatoes from Bangladesh using jute bags. Jute bags are also exported to different countries. Foreign buyers now prefer jute bags. There is also an opportunity to export. diversified jute products.
“We plan to manufacture diverse products alongside shopping bags to capture the global market for these products.”
Pran Group, a large food industry conglomerate, exports its products to more than 140 countries, including North America and Canada.
The company is now looking to invest in the jute industry, targeting exports.
Noting that they have applied for the lease from Bangladesh Jute Mills, he said, “We are now exporting food products to 140 countries. Jute can be very important for the packaging of our products.
“If we get the lease, we will invest to create 3,000 new jobs,” he said, adding that these factories require heavy investment in infrastructure development. Investments in roads, hangars, buildings and machinery will also be needed.
There is huge potential for jute products around the world. But, these products must be diversified to reap the benefits, he added.
Akij Jute Mills does business with a reputation. It now exports diversified products abroad.
The company has now requested the lease of a state-run factory to further strengthen its position in the sector, ministry sources said.
Officials of the Akij group could not be contacted by phone despite several attempts.
Although Bay has applied for the lease, the company may ultimately not continue, an official told TBS.
Under the state-owned Bangladesh Jute Mills Corporation (BJMC), 32 jute mills were operational, five of them with cases pending before the courts.
Twenty-six factories, including one for the production of viscose, closed on June 30, 2020 after being mired in debt and loss for many years.
State-owned jute mills have a history of chronic loss and shortage of capital due to inefficiency and mismanagement.
In contrast, in the jute industry, privately run jute mills are making good profits for high efficiency and management capacity, industry insiders say.
In April of this year, BJMC launched an international tender to hire or lease jute mills to the private sector.
According to sources, the largest number of applications have been submitted for Bangladesh Jute Mills in Narsingdi Ghorashal, as it is located near the city of Dhaka, with 11 companies applying for its lease. The mill was established in 1962 on 77 acres.
After receiving the final proposal from the shortlisted companies, the ministry will assess it and finalize the takers based on the technical and financial situation.
The decision to privatize the state-owned jute mills is very timely, which will open up new horizons in the jute industry in domestic and foreign markets, said Imran Ahmed, deputy secretary of the textile and jute ministry. .
Mohammad Shafiqul Islam, president of the Bangladesh Jute Goods Exporters Association (BJGEA), said it was a good decision to privatize these loss-making jute mills under government leadership because the private sector mills are doing well with good management.
The privatization of government jute mills will help regenerate the country’s good days of golden fiber, government officials say.
Jute was a major export item in the 1980s before the advent of the ready-to-wear industry.
Exports of jute and jute articles reached $ 1.16 billion in FY21, attracting the attention of major companies.
Foreign companies from India and UK interested in leasing
Mohan Jute and Pacific Jute of India and Jute Republic in London have submitted rental applications.
Formerly known as Raigarh Jute Mill, Mohan Jute is located in Raigarh. It produces hessian bags, carpet backings, jute floor protection products and yarn.
Pacific Jute in West Bengal is a 100% export oriented organization and was established in 2004, while Jute Republic was founded in 2016 and is headquartered in central London.
What tenants get
According to the terms of reference (TOR), the tenant companies will obtain the authorization to use the assets and the land, the existing capacity, the machines of these mills and they will also be able to procure new machines, if they deem it necessary, but only for the manufacture of jute and jute articles. .
Under the terms of the lease, the tenants will manage the infrastructure, equipment and land of the factories and operate the facilities under their own management.
They will only be allowed to produce jute articles and diversified jute products on the jute spinning ground.
The leasehold asset or part of it may not be mortgaged or sublet or rented to anyone, including banks or financial institutions, or intermediaries.
The government will lease the factory premises back within three months of signing the lease agreement.
Jute mills have Tk25000 crore in assets
According to the BJMC, the total assets of the government jute mills amount to Tk 25,352.46 crore, of which Tk 14,329 crore is fixed assets.
Tangible fixed assets include land, buildings, plant and equipment, furniture, transport vehicles and others.
Factories in Dhaka have the highest number of fixed assets valued at Tk 4,984.41 crore. This figure is Tk 4,435.29 crore for the Chattogram factories and Tk 4,666.19 crore for the Khulna factories.
Spinning mills other than jute have fixed assets of Tk 244.07 crore.