SECTOR STRENGHT
CERAMIC EXPORTS BUT CHALLENGES THWART INDUSTRY GROWTH
Bangladesh’s ceramic industry shows signs of recovery from the global pandemic effects with much higher potential, in terms of both domestic and foreign market demand apart from enthusiasm among and endeavours by the entrepreneurs to see it shining. However, the ceramic sector growth has slowed since manufacturers cannot deliver products on time owing to disruption or shortage of supply of gas as the key factor of production. Bangladesh’s exports of ceramic products rose to a four-year high in the 2022-23 fiscal year but could not yet match the level of exports recorded in 2018-19 fiscal year, the year before the pandemic struck the country. The country’s export earnings from the ceramic sector stood at $43.39 million, 13.22 per cent lower than the target of $50 million export set for the fiscal year 2022-23. It was still about 5.0 percent higher than the earning year before. The export of ceramic products was $41.36 million in 2021-22, $31.11 million in 2020-21, $27.97 million in 2019-20 and $68.97 million in 2018-19, according to Bangladesh Export Promotion Bureau (EPB). The country exports ceramic products to 53 countries and the domestic market size of ceramic items is around Tk 80 billion. These figures underline the fact that the country’s ceramics industry has turned into a booming manufacturing sector over the years, cashing in on growing demand both in domestic and international markets. “Manufacturers could not run factories at full capacity due to inadequate supply of gas. This was the main reason the sector did not achieve expected export growth in the last fiscal year,” said Irfan Uddin, General Secretary of the Bangladesh Ceramic Manufacturers and Exporters Association (BCMEA). Also, he added, the demand in the international market has not increased unlike expectations, due to the Ukraine-Russia war. The gas crisis hit industries last year after the government paused purchasing liquefied natural gas directly from the international spot market to stop depletion of foreign currency reserves, leading to a drastic fall in energy supply. Mr Irfan Uddin said manufacturers did not get the gas supply for around 12 hours a day since last October. “So, we could not make products on time. As a result, we were not able to supply goods against around 30 per cent of the orders,” said Irfan Uddin, also Director at FARR Ceramics Ltd. He, however, appreciated the government for providing a 20 percent cash incentive against exports of ceramic products, terming this as encouraging for the ceramic exporters. M.A. Jabbar, Managing Director at DBL Ceramics, said the business of the ceramic sector is going through a difficult stage due to increase in the production cost and the gas crisis. “Absence of uninterrupted gas and power supply and increase in the cost of production hampered production, ultimately affecting the exports of ceramics,” he argued. The entrepreneur said owing to disruptions in gas and power supply, the sector has faced a big challenge in maintaining quality of products Local ceramic manufacturers mainly produce four types of products: tiles, tableware and sanitaryware and ceramic bricks. Of the 70 manufacturers currently operating, twenty produce tableware, thirty two make tiles and the rest produce sanitaryware and ceramic bricks. Bangladesh mainly ships tableware and has added tiles, sanitaryware & ceramic bricks to the export basket in recent years. According to Mr Jabbar, considering the ongoing high inflation environment, manufacturers are not in a position to raise prices of their products despite an increase in their cost of production. As a result, the profit margin has plunged to the lowest level Ruslan Nasir, Deputy Managing Director of Mir Ceramic Limited, said tiles manufacturers export on a limited scale and contribute an insignificant amount to the export basket. The company mainly exports to the north-eastern states of India. Ruslan Nasir said local tiles manufacturers are focusing on the local market since demand has grown over the past decade, thanks to rapid urbanisation. “There is a lot of competition in the tiles segment globally. And since the sector is dependent on imported raw materials, it will take time for the local producers to grab a significant share of the international export market.” He, however, sees a bright prospect of the tiles segment since Bangladeshi manufacturers produce world-class products. BCMEA President Md. Shirajul Islam Mollah said, “At present, two major problems of the ceramic sector are gas and dollar-crisis. It is facing a challenge. We are not getting uninterrupted gas even with increased prices. Most of the factories in the ceramic sector are in Gazipur. Due to the gas crisis, the production of factories here has dropped to 40-50 percent. Again, the gas situation is somewhat better in Bhola and Habiganj, but there is a problem in Narsingdi and Rupganj. Production of most factories is disrupted due to the gas crisis. Overall production is going down by 40 percent due to the gas crisis. So the production cost is also increasing and exports are facing challenges.” Ceramic manufacturing companies are also facing problems in opening letters of credit (L/Cs) for import of raw materials due to dollar shortage. He said 90 per cent of the raw materials of ceramic products are imported. Meanwhile, the increase in dollar and gas crisis, on the other hand, due to the increase in ship fares, the cost of production has increased by 30-35 per cent. Due to the gas crisis, the tiles could not be produced according to the market demand in the last winter season. It is not possible to use more than 60-70 per cent production capacity of the factory According to the National Board of Revenue (NBR) data, imports of mineral clay — ‘China clay’ and ‘Ball clay’, the main raw materials for ceramic products — fell by 17 per cent in the fiscal year 2022-23. Now, it takes 15 days to open L/Cs for raw material imports compared to only two days for the purpose, due to the dollar crisis. Thus there is a shortage of raw materials in the factories. He said, ‘All in all, the ceramic sector
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Ceramic Industry will be Sick if Gas Price Hiked
BCMEA REPORT When the world economy is in turmoil due to the effects of the Corona virus and the Russia-Ukraine war, and the Bangladesh economy is in the grip of inflation and runs risk of recession but expecting to make a rebound, the process of raising gas and electricity prices has started in the country. A proposal is made to increase the price of gas by 117 per cent and that of electricity by 66 per cent. Six gas distribution companies have applied to the Bangladesh Energy Regulatory Commission (BERC) to raise the tariffs. The BERC held a public hearing on 21-24 March 2022. Its technical committee has approved a 20 per cent hike in gas price and a 45 per cent increase in electricity wholesale price. However, the country’s industrial entrepreneurs said if the price of gas is raised again at this point in time, the country’s industrial sector will lose its competitiveness. Exports and employment will be challenged. The country will be filled with foreign products. Mr. Irfan Uddin, General Secretary of the Bangladesh Ceramic Manufacturers and Exporters Association (BCMEA), vehemently opposed the move to increase gas prices, saying fuel costs account for 20 to 22 per cent of the total expenditure on ceramic products. Ceramic is essentially an energy-dependent and labour-intensive industry. Now, if the price of energy or gas increases, the cost of production will increase. But it will not be possible to sell ceramic products at higher prices. Such a situation will make many factories sick and reduce employment. Some may also default in repaying bank loans. “This will be the eighth time in the last 10 years that the government has planned to increase gas prices by an average of 117 per cent. Another hike will raise production cost by 18-20 per cent.” He said the price of gas had been increased more than once earlier with a pledge to resolve the gas crisis. In the past 10 years, the price of gas has been raised by 400 per cent, with promise every time of uninterrupted supply and proper pressure of gas. However, that did not happen so far. So, the gas price should not be raised without implementing the pledge. Moreover, while Titas made a profit of Tk 1,500 crore in the last four years, there is no moral basis of increasing gas price. On the other hand, system loss of Titas is still 12%, where 1% system loss is equivalent to Taka 300 crore. Mr. Irfan Uddin further said the country’s ceramic sector is paying more than Tk 1,200 crore in gas bills annually. For half of a day there is very low pressure of gas or even no gas and as a result, most of the kilns have to be shut down and running products in these kilns are wasted. According to the conditions, gas will be supplied at a pressure of 15 PSI, but it dropped from 3 to maximum 5 PSI after 11:00 am to 11:00 pm. Almost 50-60 per cent of the production capacity of many factories remain utilised due to the gas crisis. Titas is taking bills with ‘air’ instead of gas. In order to deal with this situation, Titas authorities are importing EVC (electronic valve control) meters but not supplying them to the factories. He said most of the factories had to set up captive power plants at a huge cost. The entrepreneur pointed out that some of investments are not coming to the country only because of the energy crisis. Ceramic makers urge Govt. not to raise tariffs The Bangladesh Ceramic Manufacturers and Exporters Association has urged the government not to hike the price of gas. “This will be the eighth time in the last 10 years that the government has planned to increase gas prices by an average of 117 per cent,” association president Mr. Shirajul Islam Mollah told a press conference recently. He urged the government not to increase the price of gas used in manufacturing ceramic items to protect the gas-dependent industry and thus help it stay competitive in the global market. He mentioned that, in 2019, production cost of ceramic products per kilogram increased by 10-12 per cent on average as a result of about 33 per cent increase in gas prices. Another hike will raise production cost by 18-20 per cent and will also have a cascading effect on all areas, transportation cost, he added. Mr Shirajul Islam said they need to keep kilns or chimneys turned on 24 hours a day in a ceramic factory. Even if gas pressure goes down frequently, they have to pay bills for full pressure. “We demand immediate installation of EVC meters to stop injustice in gas supply.” He said ceramics is one of Bangladesh’s largest industries. “We need to keep kilns or chimneys turned on 24 hours a day in a ceramic factory. Even if gas pressure goes down frequently, we have to pay bills for the full pressure. We demand immediate installation of EVC meters to stop this injustice in gas supply.” – Mr. Shirajul Islam Mollah CAB calculations have shown that the price of gas can be reduced by 16 paisa more per unit. There is scope to reduce gas price: CAB Professor Shamsul Alam, an energy adviser at the Consumers Association of Bangladesh (CAB), said the gas distribution companies were all profitable. At present the people cannot afford to pay extra. And companies have failed to justify price increases. CAB calculations have shown that the price of gas can be reduced by 16 paisa more per unit. The crisis is not over yet because of Covid-19. At a time when subsidies were supposed to increase, there was no provision for subsidies. About Tk 6,000 crore was supposed to be subsidised, but so far only Tk 3,000 crore has been given. Although the government has said no to subsidiesm the BERC technical committee unjustly calculated it and recommended a 20 per cent price increase. He said the government is taking
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How BERC Can Rationalise Gas Price
The proposals put forward by Petrobangla companies to the Bangladesh Energy Regulatory Commission (BERC) for a 117 per cent increase in the price of natural gas supplied to various categories of subscribers on the plea of the LNG price spiral in the spot market. As a statutory body, the BERC is mandated to determine fuel and electricity tariffs considering all aspects of price structure, efficiencies of different actors and protecting the interest of consumers. In the backdrop of executive authority in administering energy prices different stakeholders have emphasized a fully functional BERC. Because everybody knows BERC is not an extension of bureaucracy of the government. The recent price hike proposal has been tabled at a time when, amidst the Covid-19 pandemic, users of gas – industrial, commercial and domestic – are suffering from chronic shortage of gas supply. The President of Bangladesh Ceramic Manufacturers and Exporters Association (BCMEA) Md. Shirajul Islam Mollah complained about paying for ‘air’ supplied instead of gas. Many domestic users have to use alternate fuel. Gas deficit was there for a long time but from mid-December 2021, RLNG supply came down due to a technical glitch. Petrobangla companies supply 2,850 mmcfd against a coincident peak demand of 4,200-4,300 mmcfd. Some 78% of the supply comes from local source (Petrobangla companies operated fields and International Oil Companies), 17% from RLNG purchased under long-term contract and only 5% from spot purchase. No change of price has been reportec for 95% of the gas supplied. Only for this 5%, there has been price impact and that too was from a few cargoes purchased at higher price. For this, there is no reason why Petrobangla can submit a proposal for 117% increase of gas price. Petrobangla supply has come down from 2,760 mmcfd to below 2,350 mmcfd. There has been hardly any effective steps by the Petrobangla companies to augment gas production from own fields. Even moves for maintaining production through secondary and tertiary recovery are slow. We are not mentioning about failure in expediting exploration for gas in onshore frontier areas and offshore. Consequently, proven reserve of gas is fast depleting and many are apprehending that major depletion may trigger from 2023 and local production may even deplete below 2,000 mmcfd. The government has taken steps to import LNG by setting up floating storage and regasification units (FSRUS) in 2010. Under business as usual, such an FSRU usually takes 18-24 months to come into operation. But for Bangladesh, the first one came into operation in 2018 followed by another one in 2019. These two together has a capacity of supplying 1,000 mmcfd. At peak, they supply up to 750-800 mmcfd. Petrobangla after prolonged negotiations with Qatar and Oman could conclude long-term contracts for supplying up to 75-80 per cent of LNG supply. The remaining supply came from spot market. The government could not take advantage of very low LNG spot price during early stages of the pandemic. It has shown lack of experience of price hedging cr future purchase. As such Petrobangla ran into crisis as soon as LNG price at global market skyrocketed. Poor Sectoral Management and Corruption Added to Crisis Apart from lack of perspective planning for exploration and development, the Petrobangla companies could not arrest rampant theft and pilferage of gas from hundreds of thousands of illegal connections, illegal use of a section of legal users through meter tampering, and meter bypassing. A section of corrupt officials is engaged in the process. About 8-10 per cent of 300 mmcfd gas allegedly remains unaccounted for, causing revenue losses. This also makes distribution system unsafe as accidents prove. Moreover, Petrobangla and companies have huge overhead expenditures for heavy management. They lack adequate technical persons in boards and this goes against the provisions of Company Act. BERC can police against such irregularities by carrying out technical and management audit. By controlling systems loss, inefficiencies and colossal wastage, it is possible to reduce gas deficit. Even a 50 per cent success could offset the requirements of gas price at this critical stage when Bangladeshi industries are struggling to retain competitiveness. What BERC Can Do? It appears that the present catch22 situation with gas price has arisen from about 200 mmcfd LNG import from the global spot market at exorbitantly high price. It is well known that about 200-250 mmcfd gas goes unaccounted for in the distribution system. BERC must advise its gas distribution licensees and Petrobangla to address the issue. BERC should ask Petrobangla to seek NBR for adjusting tax, Vat and import duty of primary fuel. Petrobangla must be advised to ensure that all gas and energy companies are governed strictly in accordance with the relevant act. Offficials who are included in the company boards, cannot claim additional remunerations and benefits. BAPEX has innovated Gas Development Fund (GDF) out of gas sales proceeds for exploration and development of petroleum resources. BERC should make gas consumers know how and where this fund has been used. Bangladesh has laws, rules and policies for regulating electricity, gas and other utility agencies. BERC should monitor and overview ccmpliance. A well-crafted reporting format with all mandatory requirements can be developed for utilities to prepare and submit to BERC on monthly basis. Based on these reports, BERC can assess the performance of licensees and whenever necessary can carry out auditing. BERC can set key point indicators (KPI) as performance metrics. Among others, system loss and account receivables must feature there. Roles of Stakeholders in Enhancing Efficiencies All stakeholders have roles in creating efficiencies and eliminating illegal use of fuel and electricity, and other utility services. Regulators usually retain the right to create provision for licensees for taking permission for making major investments in infrastructure development. If that could be done, many less priority investments and wastage could be avoided. Some over ambitious projects of BAPEX and over investments of GTCL could be avoided if BERC could review these beforehand. BERC should have a team of qualified and trained energy auditors for carrying out audits
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NSDA wants to enhance Private Sector Engagement in meeting 4IR Challenges
Creating skilled human resources is the key vision of National Skills Development Authority (NSDA). Aiming to train up 86,13,000 people by the next five years, the authority has adopted the National Action Plan for 2022-27 approved by the governing board meeting on July 31, 2022. “So, my aim is to assist implementation of the vision and mandate of the NSDA to achieve the goal of a developed and prosperous Bangladesh by 2041 declared by Honorable Prime Minister Sheikh Hasina,” the NSDA Executive Chairman Mrs. Nasreen Afroz said in an exclusive interview. Ceramic Bangladesh (CB): Despite a huge demographic dividend, Bangladesh lacks skilled manpower. On the verge of the fourth industrial revolution (4IR), what does NSDA think to move forward? Nasreen Afroz (NA): The NSDA has already prepared more than 35 CS’ on ICT-related courses. We are incorporating 4IR into its curriculum gradually. In addition to that, NSDA will adopt some measures like identify and assess the skill requirements, develop a digitised skills database, incorporate ICT-related skills into the training courses, upgrade the digital skills and knowledge of the instructors, building capacity of the Skills Training Provider (STP) institutes to deliver training on digital and emerging technologies, online training, use of digital technologies for monitoring and assessing performance of STPs and tracking of graduates. CB: How is NSDA focusing on expanding domestic and foreign training opportunities? Do you plan to create opportunities for exports to developed countries? NA: NSDA is working on creating manpower export opportunities to developed countries. For this, we have already received technical guidance from the European Union Delegation which included the qualifications and skills recognition issues between Bangladesh and the EU in different angles. We hope we’ll succeed to set common, simplified rules for all professionals through the agreement, and thus eliminate the inconsistencies inherent to qualifications recognition processes between Bangladesh and EU countries. We’ll create export opportunities in developed countries. CB: Bangladesh has to hire a lot of foreign skilled people to meet the industry demand. How is NSDA working to reduce shortage of skilled manpower here? NA: The NSDA has adopted National Skills Development Policy-2021 and National Action Plan 2022-27. We have a huge demographic dividend that’s good. But, now we need to train them up to the mark matching to the demand in industries in the country. NSDA has almost 350 registered STP institutes. We develop and update curriculum for STPs. After course accreditation when training started we monitor training and conduct assessment neutrally and impartially. We emphasize quality training and quality assessment. So, the trainees are qualified once they are certified by NSDA. The young workforce thus will be skilled and ready for the industries. Thus NSDA is working to reduce shortage of skilled manpower. CB: What are the 5-year plans of NSDA to improve workforce growth, management and development? NA: The NSDA has adopted 5-year National Action Plan 2022-27 approved by the governing board meeting on July 31, 2022. There are some other ministries/ divisions/ agencies that are involved in that action plan where there are some specific targets to achieve. However, the number of total targeted trainees is 86,13,004. Of them, 49,38,870 are under fresh skilling; 9,48,925 under re-skilling; 6,44,485 under up-skilling; 10,83,785 under apprenticeship; 3,43,383 under recognition of prior learning (RPL); and 6,53,556 under entrepreneurship. CB: How does NSDA want to increase involvement of the trainees? What are the prime criteria of the trainees to engage in the training process? NA: I always believe that skills development is a shared responsibility among a number of actors playing their respective roles towards a well-functioning national skill system. The actors include NSDA, various government ministries and departments delivering skills training, public sector training providers, private sector training providers and not-for-profit or NGO training providers, ISCs, trade bodies and employers and employees associations. We want to increase involvement of the trainees through these actors. The prime criteria of the trainees to engage in the training process are passion for technical education, devotion to learn new skills, well–constructed ideas and learning capacity. There is no such barrier like age, prior learning, prior institutional recognition etc. CB: How is NSDA working to meet organisational goals for the betterment of workforce? NA: We are making competency standard and other learning materials for skills training to meet organisational goals. We also register training institutes to conduct training on the basis of those learning materials. Then NSDA conducts assessment impartially by third party assessors and provides certificate to the trainees. Besides, the NSDA formulates skills policy and action plan, strategies and guidelines; forecast demand of skilled labour in domestic as well as overseas job market; identify skills gap; raise awareness on skills training and establishing mutual recognition agreement with destination countries for the migrant skilled workers etc. Basically it is making the youth and marginal people ready as workforce through an effective skills development system. CB: How does NSDA assist the skill development programmes at the national level? NA: NSDA has developed ‘National Skills Portal’ (NSP) offering all its services through online with an aim to collect, organise, analyse and publish data systematically related to skills ecosystem of the country. We want to support the training agencies with competency-based training curriculum and with other technical assistance whereever required. In terms of capacity development, NSDA wants to support training agencies and ISCs with financial assistance from various government funds like NHRDF or any other project if available. CB: How does NSDA want to channelise focusing on academic or institutional support? NA: Through NSP, NSDA is offering all its services online and thus increasing effectiveness, transparency and accountability. Though NSDA focuses on institutional support, as we have our new workforce, we’ll try to focus on academic part as well through them. CB: For the ceramic industry, what kind of skill development programmes will you suggest? NA: I will suggest for technical skills enhancement programme; Reasoning; Analytical and Problem-solving skill enhancement programme; Trending Technology; and Interpersonal skills-related programme. CB: What is the way to develop up-skill management that can provide
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