Shut state-run jute mills to reopen in private sector?

Nearly 10 months after closing down all public sector jute mills and laying off over 50,000 workers, the government has finally moved to lease them out to interested private parties.

On Wednesday, the Bangladesh Jute Mills Corporation (BJMC) floated a bid calling for interested private entrepreneurs to invest and operate, on a long-term lease basis, 17 of the 25 state-run jute and allied mills, whose operations the government shut down in July last year.  

Officials at the Ministry of Textiles and Jute told Dhaka Tribune on Wednesday that after prolonged deliberations at a series of stakeholders’ meetings over the past nine months, the government had discarded the initial plan of operating the closed down mills under G2G (government-to-government) or PPP (public private partnership) arrangements.

“Instead, we have decided to lease out the mills to private investors under a five to 20-year agreement. We’ll receive ‘expression of interest’ bids from parties interested till June 15, and then invite the shortlisted ones to submit proposals on running the mills on lease,” said a BJMC official, wanting not to be named.

Leases would be awarded to the highest scoring bidders ranked on the basis of a combined score of technical and financial proposals weighted equally from among responsive bidders, he said. 

The 17 mills to be leased out are: Platinum Jubilee Jute Mills Ltd, Crescent Jute Mills Ltd, Eastern Jute Mills Ltd, Khalishpur Jute Mills Ltd, Daulatpur Jute Mills Ltd and Star Jute Mills Ltd in Khulna, Hafiz Jute Mills Ltd, Gul Ahmed Jute Mills Ltd, KFD Jute Mills, MM Jute Mills Ltd and RR Jute Mills Ltd in Chittagong, Jessore Jute Industries Ltd and Carpeting Jute Mills Ltd in Jessore, Bangladesh Jute Mills Ltd and UMC Jute Mills Ltd in Narsingdi, Rajshahi Jute Mills Ltd in Rajshahi, and Jatio Jute Mills Ltd in Sirajganj.

Asked why BJMC was leasing out 17 of the 25 shut-down mills, an official said there were pending cases and some procedural complexities over the remaining eight mills, but “we’ll lease those out as well in a second phase.”

Textiles and Jute Ministry Deputy Secretary Imran Ahmed, who is overseeing the leasing process, told this correspondent yesterday that the government had decided in favour of lease operations and discarded the idea of running these mills under any G2G or PPP arrangement.

Both the ministry and BJMC officials told Dhaka Tribune that the government had moved earlier to run two closed textile mills under PPP but things did not move much over the past two years.

Considering the employment generation potentials of the closed down jute mills, the government now thinks a lease process will ensure a faster resumption of production in all these mills under new private ownership. 

Years of losses – mostly owing to graft, inefficiency, lax management and monitoring – prompted the government to close down the 25 state-run jute and carpeting mills on July 1 last year. The losses incurred by the state-run jute mills have also been attributed to the BJMC’s failure to reinvest and repair worn out old machinery year after year.  

In the last 10 months, even though the jute mills have remained dysfunctional, around 3,000 BJMC officials and employees have been getting their salaries without much work being done. The BJMC could not pay the dues of all workers even after all these months since the  closure of the jute mills.  

Many private sector entrepreneurs have expressed their concerns as to whether the process of a leasing out of jute mills to private sectors will actually achieve its objectives.

They said the banks would not offer finance for any medium-term contracts. It was also difficult to make profits by investing Tk 400 to 500 crore within such a short span of time. Besides, there was a risk of the government going for sudden policy shifts.

Textiles and Jute Ministry Deputy Secretary Imran Ahmed, however, held out the assurance that the lease contracts would not be for a short duration. “We’re saying it’s five to 20 years in the bid but definitely, this lease period will be further extended for a good performing lease.”  

In its election manifesto in 2009, the Awami League had promised to make the jute industry profitable and in its early years in office it then even took initiatives of reopening two closed jute mills.

But in the last 11 years, the state-owned jute mills have incurred a loss of Tk 4,859 crore, nearly Tk. 3,000 crore of which was in the last five years.

Jute is second only to cotton in the world's production of textile fibers. Bangladesh, India, China and Thailand are the leading producers of Jute. It is also produced in southwest Asia and Brazil.  

The BJMC official website says it inherited as many as 73 jute mills, having 23,836 looms, at the time of Bangladesh’s liberation in 1971. But over the years, while private-run jute industries have witnessed some success, the state-run ones have faltered, resulting in a sorry state of affairs in the public sector jute industry.