The government plans to double the waste rates in producing apparel products from raw materials.
RMG exporters will get maximum 28 per cent waste benefits on all products in the production and export from yarn to fabric and fabric to finish items.
Sources said the Ministry of Commerce is likely to issue a notification to this effect in a day or two.
"We're going to increase the maximum waste rate from 16 percent to 28 percent, which is expected to allow readymade garment (RMG) exporters to import more yarn and fabrics duty free than the present level for the same amount of export," said a commerce ministry official.
He said the ministry has decided to set a maximum waste rate of 25 per cent for basic ingredients, 28 per cent for special ingredients and 3 per cent for sweaters and socks.
Stakeholders in the garment sector termed the decision as "better than nothing", but knitwear exporters said the waste rate needs to be increased for them.
Earlier, Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) said that it would be very positive for the apparel sector, if the waste rate is fixed at least 35 per cent.
In January, 2020, the BKMEA and Bangladesh Garment Manufacturers and Exporters Association (BGMEA) urged the government to fix the waste rate at 40 per cent for the overall benefits of the apparel sector.
Leaders of BGMEA and BKMEA said if the production waste rate of an export-oriented apparel manufacturer – who enjoys duty-free facility for raw material imports – is less than the prescribed rate, they sell the excess raw materials in the open market.
"If excess raw materials are sold in local market, the business of local companies that produce raw materials is affected," said a BKMEA leader.
On the other hand, if the actual wastage rate is higher than the rate set by the government, the authorities impose duty, supplementary duty and VAT on the extra waste, said the BKMEA.
To examine the issue, the Export Promotion Bureau (EPB) sent a letter to 20 companies, urging them to find out the actual waste rate. Only two companies responded to the EPB's inquiry, saying their waste rate was more than 40 per cent.
After that, the commerce ministry formed a committee to verify the actual waste rates in garment factories. Inspecting six factories – each producing basic knitwear, specialised items, and sweaters and socks—the committee recommended setting the maximum wastage rate by averaging the amount of wastage of similar factories.
The commerce ministry held a meeting with representatives of the BKMEA, the BGMEA and the BTMA on 22 August and decided to fix the wastage rates.
The committee proposed 25 per cent waste rate for basic knitwear including T-shirts, polo shirts, trousers, shorts, skirts and pajamas, 28 percent for specialised items like rompers, tank tops, dresses, gowns, hoodies, and lingerie items, and 3 percent for items like jumpers, pullovers, cardigans, vests, and socks.
But the BKMEA strongly opposed the decision.
First vice-president of the BKMEA Mohammad Hatem said the actual waste in factories is much higher than the prescribed rate. If the wastage rate was set at 35 per cent, the BKMEA would accept the decision.
"Despite our strong opposition, the commerce ministry is going to fix the rate that will not solve our problems," he added.
