With jute mills closed, mounting loans weigh on BJMC
The textiles and jute ministry recently sent a letter to the finance ministry seeking interest waiver for jute mill loans
As the 25 state-owned jute mills have remained closed since mid-2020, the Bangladesh Jute Mills Corporation (BJMC) has apparently had no income over the last one and a half years.
The closure leaves around Tk10,000 crore loans of these mills at public banks mounting. The jute mills corporation is now in a tight spot with the increasing interest of the loans, let alone repayment of the principal.
The corporation used to pay long-term loan instalments and interests from the income of the mills, while the government had been subsidising it to cover other operating expenses.
According to the BJMC, the liabilities of the mills amounted to Tk3,438.78 crore in FY20, while long-term bank loans were Tk9,440.33 crore.
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Corporation officials said the government injected money into the ailing mills from state-owned banks several times to keep the production lines running. As the mills were in operation, only the interest on the bank credits was paid back.
According to the corporation, its interest payment stood at Tk76.57 crore in FY22. The figure was Tk71.38 crore in previous FY21.
To reduce the subsidy burden, the government shut down the jute mills on 1 July 2020, leaving more than 25,000 mill workers jobless. With the move, the number of shuttered mills became 26 as one mill had already gone out of production.
However, production in three of the mills resumed recently after they were privatised. Besides, there have been initiatives to lease out the remaining mills to the private sector.
The mills may return to production through the privatisation process, but the loans still weigh on the government's shoulders.
What first: Interest waiver or principal payment?
About the repayment, the BJMC and the Ministry of Textiles and Jute are not on the same page.
In June this year, the textiles and jute ministry sent a letter to the finance ministry, seeking an interest waiver.
But BJMC Chairman Muhammad Salehuddin said the corporation expects the finance ministry to repay the principal. After the payment of the principal, it will seek the banks' opinion on a waiving of interest.
He told The Business Standard that he is not even aware of the textiles and jute ministry's June letter seeking the interest waiver.
There has, however, been no major development since the textiles and jute ministry sought the interest waiver from the finance ministry. Regarding the matter, the Financial Institutions Division of the finance ministry sent a letter to the Bangladesh Bank on 18 September.
In response, the central bank told the division that state-owned commercial and specialised banks can take decisions regarding loan interest waivers on their own.
The Bangladesh Bank also said since the Financial Institutions Division plays an important role in public bank management, it would be appropriate for the division to take decisions in consultation with the concerned banks.
