Originally posted in The Business Standard on 22 October 2022
Gas crisis, long hours of power outages and growing import dependence on cotton, all have put textile mills in a tight spot. All the problems earlier deemed for a short period have now fallen into the midterm.
I do not see any easy solution to these crises. So, entrepreneurs should not go for new investments in the textile sector, given the current situation.
If production does not go normal or millers do not get product prices in line with cost increases, they will find it very difficult to repay bank loans. That will be a new concern.
At present, banks can negotiate with textile millers on how they can support the millers to come out of this lean phase.
Amidst all considerable odds, there is good news that prices of cotton are on the decline. Textile sector entrepreneurs may get some benefit from it in the future.
Uninterrupted gas supply should not be expected in the current situation but the millers can now try to get at least moderate supplies.
And, they are even willing to pay extra for uninterrupted supplies, but whether other sectors can bear this additional cost burden needs also to be taken into consideration.
In the current scenario, the millers should estimate what will be the demand for textile products for the next six months to a year.
Accordingly, they need to set a target of how much production capacity they can utilise, taking gas and electricity supplies into consideration.
Without thinking about running factories at full capacity, they should plan operations according to the demand and minimise losses.
Dr Khondaker Golam Moazzem, research director, CPD