The government is likely to lease state-owned jute mills to the private sector within this year.
State-owned jute mills, which have been mired in losses and debts for decades due to graft, inefficiency, lax management and monitoring, low productivity, and outdated machinery, will be revived under private management, say, industry stakeholders.
Officials of the Bangladesh Jute Mills Corporation (BJMC) said they expect to finalize the process of leasing within this year, but the surge of Covid-19 cases and the ongoing lockdown have hampered progress.
The government decided to shut down the production of 25 state-owned jute mills operated by the BJMC on July 1 last year, while another one was closed earlier.
Then the BJMC decided to lease 17 of the 26 closed jute mills and called for Expressions of Interest (EOIs) in April this year, following which several local and foreign companies submitted lease applications.
Interested companies submitted their applications on June 15 and the lease proposal opening committee held its first meeting on June 17, sources said.
So far, 24 companies, including two Indian and one from the UK, have submitted 59 tenders for the lease of 14 mills.
But investors showed apathy in the application for three of the mills in Khulna.
The BJMC is going to wait for final proposals from the shortlisted organizations after scrutinizing their applications.
Talking to Dhaka Tribune, BJMC Chairman Md Abdur Rouf said that they are moving forward as per the plan.
“We have already called for EOIs and gotten a proper response. We have evaluated these EOIs, then shortlisted the companies and all that is left is to invite the interested companies to submit the final proposals,” he added.
But it has come to a standstill due to the ongoing Covid-19 situation, he added.
“However, as soon as the situation improves, we will start work on the final proposal. We want to complete the procedures within this year,” said Abdur Rouf.
The BJMC chairman also said that the government has decided to run all closed mills under private management through lease or rental agreement under Section 11 of the Industrial Enterprises Nationalization Act, 2018.
“The main objective is to operate the state-owned jute mills under private management for producing jute goods, including jute diversified products, and thereby contributing to the national economy,” he also said.
An official of the BJMC, requesting anonymity, said that privatization of state-owned jute mills will create employment for the retrenched workers of closed mills and also create new employment opportunities.
“About 25,000 workers lost their jobs due to the closure of the jute mills last year. Workers of closed jute mills will get jobs on a priority basis according to their skills,” he added.
A general manager of BJMC said that the terms of the lease will be five to 20 years, which may be extended based on satisfactory performance of the first lease.
The lessees will manage the mills’ infrastructure, equipment, and land, and run the facilities under their own management as per the rules of the lease, he also said.
Moreover, the lessee will undertake the necessary interior decoration, install new machinery or renovation of existing ones, and construct new facilities.
The lessee will only be allowed to produce jute goods and diversified jute products on the jute mills’ lands.
Moreover, the leasehold property or any part of it cannot be mortgaged or sub-leased or rented to any party, including banks, financial institutions, or intermediaries.
According to a source from BJMC, Chhattisgarh-based Mohan Jute, West Bengal-based Pacific Jute of India, and the London-based Jute Republic have submitted lease applications.
However, investors may not be interested in the government’s policy to reopen closed jute mills, said private jute sector entrepreneurs.
According to them, investors may not want to invest Tk400-500 crore with medium-term lease without ownership because they will suffer financially if the policy of the government changes at any time.
A director from Bangladesh Jute Spinners Association (BJSA) said that a huge amount of money has to be invested for modernization of jute mill equipment, which will not come up in short-term leases.
“It will be sufficient if there will be a long-term contract like 99 years. The equipment of the mills is so old that investors have to start from the beginning,” he added.
According to the BJMC, the current debt of the jute mills is Tk2,387.89 crore. 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 and the non-jute mills have fixed assets of Tk244.07 crore.
The land area of 26 jute mills with dammed one is 1,313.47 acres and the land of 17 jute mills open for lease is 949 acres, said the BJMC.
Jute, known as the golden fibre of Bangladesh, was a major export item in the 80s before the initiation of the RMG industry.
In Fy21, jute and jute goods earned $1.16 billion, fetching a 31.63% growth, up from $882.35 million in FY20, according to EPB data.