How civil unrest in Bangladesh has hit Gujarat's textile, chemical exports

Civil unrest in Bangladesh has hit the trading community hard in Gujarat, as export of reactive dyes, chemicals, pigment paste, knits, man-made textiles, medicines and tiles has been affected in the aftermath of the Sheikh Hasina government’s collapse in the neighbouring country.

A majority of the businessmen who are facing huge losses are from the state’s MSMEs sector. According to an estimate by the Gujarat Chamber of Commerce and Industry (GCCI), a payment of about Rs 1,200 crore is stuck due to the stalling of trade between the two countries. The traders are anticipating that the Letters of Credit issued by Bangladesh banks may not be honoured due to the prevailing anti-India sentiment there.

Exports under threat

“Trade between India and Bangladesh was worth $14 billion in 2023 with India exporting goods worth $12.2 billion and importing goods worth $1.8 billion. The trade was expected to rise this year but the fall of the Sheikh Hasina government following civil unrest is likely to slow down the trade, at least in the short term,” Shailesh Patwari, former GCCI chief, told The Federal.

“Following the Russia-Ukraine war and the recession in Europe, Bangladesh had been the only hope for export of goods like dyes, chemicals and intermediates, pigment paste, fertilizers, etc. Now even that prospect is under threat,” he added.

Notably, Gujarat exports a wide range of products to Bangladesh, with monthly exports valued at Rs 800-1000 crore. A significant part of these exports comprises chemicals, including dyes and intermediates that are used in Bangladesh’s massive textile industry.

Significantly, 2023-24 witnessed an increase in the exports with chemicals worth Rs 5,000 crore being shipped to Bangladesh. However, with the prevailing political instability in the neighboring country, the shipments have either come to a standstill at Gujarat ports or halted at ports in Bangladesh.

Biggest export market

“Bangladesh is the biggest export market for Gujarat-based spinning industry with around 60 per cent of the products being exported to the neighbouring country. Right now, more than 100 containers, each weighing 20 tonne, are stranded at Gujarat’s ports, waiting for the exports to resume. There will be a significant impact on the industry if the situation is not resolved soon,” Rahul Sah, co-chairman of the GCCI textile sub-sector told The Federal.

“Yarn prices have dropped by Rs 8 per kg since last week. This has led to concerns among the textile traders in Surat and Ahmedabad, who were primarily sustaining the trade with Bangladesh. The textile industry has been in recession since 2017 with back-to-back hits in the form of demonetisation, GST implementation, COVID-19 pandemic, Russia-Ukraine war and now the situation in Bangladesh. The traders need a window for revival of trade,” Champalal Bothra, president of Federation of Textile Traders Association (FOTTA), told The Federal.

“Apart from cotton yarn, Gujarat also exports polyester to Bangladesh. The closure of over 3,000 textile mills in Bangladesh left the polyester traders staring at an uncertain future. If situation doesn’t return to normal soon, the textile sector may face a loss of Rs 100 crore a month,” he said.

Exporters to hold meet

The ceramic and chemical sectors are also apprehending tough times ahead. Gujarat exports ceramic tiles worth Rs 10 to 12 crore annually and around 3,000 to 4,000 tonnes of dyes to Bangladesh every month.

“Gujarat’s dye manufacturers supply around 3,500 to 4,000 tonnes of reactive dyes to Bangladesh every month. Bangladesh accounts for approximately 15 per cent of the state’s dye exports. We are going to hold an urgent meeting of exporters to assess the situation and explore potential in other markets,” Nilesh Damani, vice-president of the Gujarat Dyestuffs Manufacturers’ Association (GDMA), told The Federal.

“After the US’s decision to impose anti-dumping duty on ceramic tile imports from India, the sector has been going through a slow phase due to disruption in orders. About 25 per cent of orders that the sector received from USA were halted until May this year. There were bulk cancellations as well. The Morbi ceramic industry had already been grappling with low demand owing to duty hike by Gulf Cooperation Council (GCC) nations and an economic slowdown in European countries. With three of our major export destinations impacted, the industry was largely banking on its exports to Bangladesh. We are once again staring at an uncertain situation,” KG Kundariya, former president of the Morbi Ceramic Association, said.