Entrepreneurs in the ceramic sector in the country, who are currently facing challenges due to the ongoing dollar and gas crisis, have urged the government to withdraw the supplementary duty and introduce a depreciation facility for the import of raw materials.
In a pre-budget discussion organised by The Business Standard on Sunday, they said there is a supplementary duty of 15% and 10% imposed on tiles and sanitary ware production respectively.
“Supplementary duty is typically levied on luxury items. However, tiles and sanitary ware products have now become essential for both rural and urban areas. Therefore, it is imperative to remove the supplementary duty for these products and consider them as necessities,” said Irfan Uddin, general secretary of the Bangladesh Ceramic Manufacturers & Exporters Association (BCMEA) and director of FARR Ceramics Ltd.
He urged the government to take such action in the upcoming budget.
Mohammed Shamsul Huda, vice president of BCMEA and managing director of Greatwall Ceramic Industry, has demanded a reduction of the supplementary duty step by step if it is not possible to withdraw it completely at one go in the next budget.
He suggested that for the current year, a reduction of 2.5 percentage points to 12.5% for tile manufacturing and 7.5% for sanitary ware production would be a reasonable step. Additionally, he proposed a similar rate reduction for the following year to provide further relief to the industry.
In the pre-budget discussion, the entrepreneurs put forth a proposal to impose duties based on the raw materials’ moisture content.
Irfan Uddin explained that approximately 30%-35% of clay evaporates after being imported as raw material, yet taxes are currently levied on the entire import value.
Furthermore, the entrepreneurs have asked for the provision for duty-free import of industrial raw materials as a separate category. Irfan Uddin noted that currently a duty of 10% to 15% must be paid for importing certain raw materials.
“However, if the National Board of Revenue (NBR) allows the importation of raw materials with an Industrial Registration Certificate (IRC), we can import them at zero duty, just like other industries in the country,” he said.
“Moreover, we also urge an increase in import duties based on the assessment value of imported goods. Last year, the government reduced the duty in this regard,” added Irfan Uddin.
Huge potential in the sector
According to the entrepreneurs, over the past decade, the ceramic industry has experienced extraordinary growth, expanding five-fold to approximately Tk10,000 crore. This industry has played a vital role in conserving a significant amount of foreign currency by fulfilling the lion’s share of domestic demand.
They have also emphasised that it directly employs over 70,000 individuals, highlighting its substantial contribution to employment generation and the overall economy.
Irfan Uddin emphasised the enormous potential of the ceramic industry in Bangladesh. He noted that the demand for ceramics has risen significantly over the past decade, driven by economic growth and urbanisation.
In the past, around 90% of ceramic products were imported, but now, despite the substantial increase in demand, local companies are fulfilling 90% of the market’s needs, he said.
He further mentioned that the country has witnessed the establishment of approximately 70 companies producing top-notch tiles, tableware and sanitary ware.
Shamsul Huda pointed out that a decade ago, demand for ceramic tiles in rural areas accounted for only 30% of the total market. However, there has been a remarkable shift, and currently approximately 60% of tiles are being sold in villages.
This significant increase in demand in rural areas indicates a growing potential for the ceramic industry.
Gas supply big challenge
The entrepreneurs expressed concerns about the challenges they face due to the rising prices of gas and insufficient gas pressure, leading to production stoppages and financial losses.
Shamsul Huda stated that the price of gas has surged by 150% since last February. In February, the gas bill amounted to Tk5 crore, which sharply increased to Tk13 crore in March. This significant rise in gas prices has resulted in an overall increase in production costs for the ceramic industry.
Production cost hike impacts exports
The entrepreneurs stressed that ceramic exports have not been growing as anticipated despite this potential. A decade ago, ceramic exports exceeded Tk300 crore, and currently they have grown to Tk550 crore.
Shamsul Huda pointed out the challenges faced by the ceramic industry in exporting products to certain European countries over the past five years. The primary obstacle lies in the need to import raw materials, which has the industry incur significantly high freight costs.
He said the market is predominantly monopolised by China, while Italy and Spain enjoy some market share due to their advantage in raw materials. Turkey is another good option for meeting the ceramic demands of European markets.
Irfan Uddin said that Europe constitutes 60% of Bangladesh’s export market. However, the rise in the value of the dollar and escalating freight charges have led to an increase in the costs of importing raw materials, making it challenging to compete in those markets.