Big relief for RMG: cash incentive soars to 5pc

In a major policy shift aimed at bolstering the country’s primary textile sector, the Ministry of Finance has drastically increased the alternative cash incentive for the readymade garment (RMG) exporters.

The incentive, granted against the use of locally produced yarn and fabric instead of bonded warehouse or duty drawback facilities, has been raised from 1.5pc to 5pc.

The Ministry of Finance issued a formal directive to the Governor of Bangladesh Bank on Thursday, confirming the decision.

According to the directive, RMG exporters must submit authentic proof of sourcing yarn or fabric from domestic mills to avail of this enhanced incentive. The new rate comes into effect retroactively from 1st July .

A senior official at the Ministry of Finance, speaking on the condition of anonymity on Friday, confirmed that Bangladesh Bank will soon issue the final circular outlining the operational modalities for commercial banks.

The policy breakthrough follows intense lobbying by the Bangladesh Textile Mills Association (BTMA). A delegation led by BTMA President Shaukat Aziz Russell recently met with Finance Minister Amir Khasru Mahmud Chowdhury at the National Board of Revenue (NBR) building in Agargaon.

During the meeting, the BTMA placed a 6-point charter of demands, primarily focusing on increasing the cash support from 1.5pc to 5pc to make local spinning and weaving mills competitive against cheaper imports.

Insiders revealed that textile mill owners had been pressing for this hike since the tenure of the outgoing interim government. While a policy agreement was reached in principle back then, a final decision was deferred.

Following the February elections and the subsequent formation of the government by the Bangladesh Nationalist Party (BNP), BTMA leaders renewed their negotiations.

The Finance Ministry moved forward with the directive shortly after receiving a ‘green light’ from the Prime Minister.