Leasing process of two state-owned jute mills at a standstill

• Saad Musa Group selected for leasing Hafiz Jute Mills in Chattogram
• Mimu Jute Mills selected for Crescent Jute Mills in Khulna
• The companies must pay 24 months' rent in advance for the lease
• Even after multiple time extensions, the firms are yet to make the full payment
• Lease contracts to be cancelled unless full payment by Dec

The leasing process of two state-owned jute mills in Khulna and Chattogram under the Bangladesh Jute Mills Corporation (BJMC) has been at a standstill as the selected companies are yet to provide the security money.

According to BJMC officials, Saad Musa Group has been selected to lease Hafiz Jute Mills in Chattogram and Mimu Jute Mills to lease Crescent Jute Mills in Khulna. Under the rules, a company has to pay 24 months of advance rent to lease a jute mill as security.

The rent for Hafiz Jute Mills is Tk64 lakh per month and as per the terms and conditions Saad Musa Group will have to pay about Tk15 crore as security money.

BJMC officials said the company has paid only Tk50 lakh so far and has pledged to pay the remaining amount by December this year.

Mimu Jute Mills has also paid only a part of the security money, the officials said without disclosing the actual amounts involved in the leasing process.

As per the conditions, the deal will be finalised only after the security money is paid. A joint team of the BJMC will then hand over the jute mills to the leasing companies.

The companies will have to start production within three months after that. The security money will be refunded once the agreement expires.

If the companies fail to pay the security money in time, the lease will be cancelled.

Moreover, after the final agreement, the leasing companies will get nine months of grace period to pay the monthly rent, meaning the rent has to be paid from the 10th month of the final agreement.

According to BJMC sources, the two companies have not yet paid the remaining amount of the security money even after extensions of time following their appeal.

So far, Saad Musa Group has applied three times for a time extension to pay the security money.

Muhammad Mohsin, managing director of Saad Musa Group, told The Business Standard, "We have paid a part of the amount. Now, we have appealed for time to pay the remaining amount as we are facing some financial crises."

He said, "We want to reduce the grace period and finalise the deal with the partial rent that we have already provided. We have proposed that the BJMC authorities shorten the grace period for two months and finalise the contract with what we have paid."

Mimu Jute Mills has also applied for an extension of time, but the officials of the company refused to disclose the details.

On 1 July 2020, the government announced the closure of all government jute mills, aiming at their privatisation. For this, around 25,000 workers were sent on voluntary retirement.

The objective of the privatisation move was to create employment for the retrenched workers of the closed mills, create new employment opportunities, enhance production of jute and diversified products and their export potential.

After the government decision, the BJMC called for international tenders in 2021 for 17 government owned jute mills. Around 50 local and foreign companies participated in the tender.

In the first phase, the BJMC selected five companies – Unitex Group, Saad Musa Group, Mimu Jute Mills, Bay Group with a foreign venture, and the UK's Jute Republic – to hand over Hafiz Jute Mills and KFD Jute Mills in Chattogram zone, Bangladesh Jute Mills and Jatio Jute Mills in Dhaka zone, and Crescent Jute Mills in Khulna zone.

Bay Group and Unitex Group have already started production in Bangladesh Jute Mills and KFD Jute Mills respectively.

Jute Republic from the UK has not yet finalised the lease agreement for Jatio Jute Mills in Sirajganj.

At the beginning of this year, the BJMC again invited tenders to lease 13 jute mills for which 18 domestic and foreign companies submitted tenders. So far, seven jute mills have been finalised for lease after scrutiny.

BJMC sources said the process of leasing those mills is currently going on.