Rush to lease shuttered govt jute mills to private firms

The government is hurrying up to lease out 12 shuttered state-run jute mills to private companies in an effort to hasten their handover so that they can resume their operation soon.

Officials privy to the process said the list of private firms will be finalised by the last week of September, or in October. The mills will be handed over to entrepreneurs this year so that the jute units can resume production at the beginning of 2022.

"We have shortlisted 25 proposals for the 12 mills, and sent it to the Ministry of Textiles and Jute," AFM Ehteshamul Hoque, secretary at the Bangladesh Jute Mills Corporation (BJMC) and a member of the lease proposal opening committee, told The Business Standard.  

He said the ministry and top government officials will make the final selection as the government wants the handover fast.

Sources said the shortlisted 25 proposals came from 15 local and international business giants such as the Pran Group, Bay Group, India's Pacific Jute Mills and Mohan Jute Mills, and UK's Jute Republic. The private sector firms will get the mills on lease for 5-20 years.

The government closed the shutters of 26 state-run jute mills on July 1 last year due to heavy losses and excessive production costs, sending more than 25,000 workers on early retirement with golden handshakes.

At the time, the jute ministry in a press release said the mills would be modernised and reopened soon on joint venture, PPP, or a G2G agreement.

However, a lease proposal committee comprising representatives from the jute ministry and BJMC was formed following the mill closure, and international tenders were floated for 17 mills in April this year.

Five jute mills – three in Khulna, one in Dhaka and Chattogram each – did not have any lease proposal submitted for them.  

Officials said breathing new life into the closed mills aims at generating jobs and increasing export earnings from the fibre as jute and jute-made products logged 31% export growth in fiscal year 2020-21.       

AFM Ehteshamul Hoque said a tender will be floated again for the remaining five mills once the handover of the 12 units is completed.

The shortlisted firms

Of the shortlisted 15 companies, many only have one proposal while some have as many as four proposals.

The list includes Unitex Spinning Limited, Bay Footwear Ltd, Allplast Bangladesh Ltd, Pran Foods Ltd, Creation Private Ltd, Saad-Musa Group, Mimu Jute Mills Ltd, Unitex Composite Ltd, Purobi Trading Ltd, OMOR & Brothers, Afzal Fiber Processing Industries, Dell Fast International, India's Pacific Jute Mills and Mohan Jute Mills, and UK's Jute Republic.    

Including the 26 mills closed last year, the BJMC owns 32 jute mills across the country. Five of the mills have pending cases while one now manufactures viscose – a semi-synthetic material used in apparel making.    

The listing process

On 27 April this year, the BJMC floated an international tender for 17 mills. Responding to that, some 24 firms submitted 58 tender proposals. Many entities submitted single proposals while some came up with multiple proposals.      

Subsequently, the lease committee shortlisted 48 firms and asked them to submit the final proposals by 31 August. 

The committee received 29 final proposals, and four of them got dropped in the verification process. The committee finalised 25 proposals eventually, and sought a decision from the jute ministry.

AFM Ehteshamul Hoque said there were no final proposals from two of the firms though they initially showed interest.  

Losses amounting to Tk11,000 crore

According to available data, the BJMC incurred losses of more than Tk11,000 crore for the mills since 1972. The corporation witnessed profits only for four fiscal years –  1979-80, 1980-81, 1982-83, and 2010-2011.   

Corporation officials claimed payments on government wage board standards, regularising temporary workers and worker payments even when production shutdown contributed to the losses.  

They said state-run mills pay Tk8,300 to a worker per month as per the wage structure while the payment is Tk2,700 in private companies. Furthermore, around 80% of the labourers at state-owned mills were senior in age and got higher payments.     

On top of this, they claimed that with more permanent workers, half the production lines at the mills remained off owing to old machinery – that led to "salary without work", eventually turning the mills into loss-making ventures.