Big groups foresee business in jute

A number of big business conglomerates have stepped up to take over shut state-run jute mills to cash in on growing export potentials.

Pran, Bay and Akij are among some big names who want to invest in such jute mills, while two jute mills from India and one from the United Kingdom are also in the race, according to sources at the textiles and jute ministry.

Twenty-four companies vied for the lease of 14 out of 17 mills put on an international tender.

Imran Ahmed, deputy secretary of the textiles and jute ministry, said top businessmen apart, new entrepreneurs have shown their interest in joint ventures, which is very auspicious.

"We expect that the mills will be operational under private management early next year if the lease-out process is completed by September-October this year," he added.

The state-owned mills, closed after years of losses, will be leased out initially for 5 to 20 years and there will be options to extend it further later.

Akij Group already has a strong presence in jute business, whereas Pran is willing to enter the sector as a new player and the group will run its business 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 shopping bags are also exported to different countries. Foreign buyers now prefer jute bags. There is also an opportunity to export jute diversified products.

"We are planning to manufacture diversified products alongside shopping bags to grab the global market for such products."

Pran Group, a large conglomerate in the food manufacturing industry, exports its products to over 140 countries, including North America and Canada.

The company is now looking to invest in the jute industry, targeting exports.

Mentioning that they have applied for getting the lease of 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 such mills need heavy investment in infrastructure development. Investment in roads, sheds, buildings and machinery will also be required.

There is a huge potential for jute products in the world. But, such products need to be diversified to reap the benefits, he added.

Akij Jute Mills is doing business with a reputation. It now exports diversified products abroad.

The company has now applied for the lease of a state-run mill to further strengthen its position in the sector, ministry sources said.

Akij Group officials could not be contacted over the phone despite several attempts.

Although Bay submitted an application for leasing, the company might not finally go on with it, an official told TBS.

Why leasing out

Under the state-owned Bangladesh Jute Mills Corporation (BJMC), 32 jute mills were operational, with five of them having cases pending in court.

Twenty-six mills, including one for viscose production, closed down on 30 June 2020 after they had been mired in debts and losses for many years.

State-owned jute mills have a history of chronic losses and capital shortage for a lack of efficiency and poor management.

On the contrary, in the jute industry, jute mills under private management are making good profits for high efficiency and management capacity, say industry insiders.

In April this year, the BJMC had floated an international tender to lease out or rent jute mills to the private sector.

According to sources, the highest number of applications was submitted for Bangladesh Jute Mills in Narsingdi's Ghorashal as it is located near Dhaka city, 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 evaluate it and finalise the lessees on the basis of technical and financial situation.

The move for privatising state-owned jute mills is very timely, which will open new horizons in the jute industry in both domestic and foreign markets, said Imran Ahmed, deputy secretary of the textiles and jute ministry.

Mohammad Shafiqul Islam, chairman of the Bangladesh Jute Goods Exporters Association (BJGEA), said it is a good decision to privatise these loss-making jute mills under the government management because the private sector's mills are doing well under good management.

The privatisation of government jute mills will help regenerate good days of the country's golden fibre, say government officials.

Jute was a major export item in the 80s before the advent of the readymade garment industry.

Exports of jute and jute goods fetched $1.16 billion in FY21, drawing attention from leading businesses.

Foreign firms from India and UK interested in lease

Mohan Jute and Pacific Jute of India and the Jute Republic in London have submitted lease applications.

Formerly known as Raigarh Jute Mill, Mohan Jute is located in Raigarh. It produces hessian sacks, carpet backing, jute soil savers, and yarn.

Pacific Jute in West Bengal is a 100% export-oriented organisation and was established in 2004, while the Jute Republic was founded in 2016 and is headquartered in central London.

What the lessees to get

According to the term of reference (TOR), lessee companies will get permission to use assets and land, existing capacity, machinery of these mills and they can also procure new machinery, if they deem it necessary, but only for manufacturing jute and jute goods.

As per the terms of the lease, the lessees will manage the mills' infrastructure, equipment, and land, and run the facilities under their own management.

They will only be allowed to produce jute goods and diversified jute products on the jute mill land.

The leasehold property or any part of it cannot be mortgaged or sub-leased or rented to any party, including banks or financial institutions, or intermediaries.

The government will hand over the premises of the leasehold mill within three months from the signing of the lease contract.

Jute mills have Tk25000 crore in assets

According to the BJMC, the total assets of the government jute mills amount to Tk25,352.46 crore, including Tk14,329 crore in fixed assets.

Fixed assets include land, buildings, installations and equipment, furniture, transport vehicles and the like.

The mills in Dhaka have the highest amount of fixed assets valued at Tk4984.41 crore. This figure is Tk4,435.29 crore for mills in Chattogram and Tk4,666.19 crore for mills in Khulna.

Non-jute mills have fixed assets of Tk244.07 crore.