Tariff shield for resin, polyester fibre producers sparks cost fears for plastics, textile makers
Under the proposed finance bill, import duties on PVC resin and PET resin have been doubled from 5% to 10%, while the duty on polyester staple fibre has been raised from 1% to 5%.
The government has proposed higher import duties on several raw materials in the FY2026 budget to protect domestic manufacturers, but businesses that rely on those materials say the move will increase production costs and ultimately raise consumer prices.
Under the proposed finance bill, import duties on PVC resin and PET resin have been doubled from 5% to 10%, while the duty on polyester staple fibre has been raised from 1% to 5%.
PVC resin is a versatile, cost-effective white powder used to manufacture plastics and rubbers; PET resin is a clear, lightweight, and recyclable thermoplastic polymer used to manufacture food and beverage containers, consumer packaging, and synthetic fibers.
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Both are key inputs for pipes, water tanks, packaging materials, healthcare products, electronics, automobiles, beverage bottles and pharmaceutical packaging.
Industry stakeholders argue that local producers cannot meet domestic demand and often charge higher prices than imported alternatives.
According to plastic sector entrepreneurs, the country's annual demand for PVC resin is about 500,000 tonnes and for PET resin around 850,000 tonnes. Local production capacity stands at roughly 150,000 tonnes and 100,000 tonnes respectively, leaving around 70% of demand dependent on imports.
Plastic manufacturers say the duty increase will directly raise their costs.
Riad Mahmud, managing director of National Polymer Group, said local resin is already more expensive than imports and domestic producers can supply only 27% of market demand.
"We will now have to import at a higher cost, which will increase product prices and reduce demand," he told The Business Standard.
Riad also warned that the policy could create monopolistic market conditions by favouring a handful of large producers.
Concerns in textile sector
The increase in polyester staple fibre duty has also raised concerns among textile manufacturers.
Bangladesh earns about 25% of its garment export revenue from man-made fibre (MMF)-based products, while such fibre apparel accounts for nearly 70% of the global apparel market. This potential has attracted major investments from companies, including Square Textiles, Noman Group, Ha-Meem Group, Cumilla Spinning and NZ Group.
Industry insiders say local polyester staple fibre producers can meet only 10%-15% of demand and their products are more expensive than imports.
Textile mill owners warn that the duty hike will increase the cost of producing yarn, blended yarn and fabrics for nearly 40 man-made fibre-focused mills.
Saleudh Zaman Khan, managing director of NZ Group, said the measure creates a new challenge for manufacturers.
"A local producer makes polyester staple fibre, but its supply is far below demand and prices are higher. This will increase our sourcing costs and make our yarn more expensive," he said.
According to Saleudh, the cost of producing one kilogram of yarn using polyester staple fibre will rise from around $3 to $3.15.
"This will weaken our competitiveness against India, where manufacturers already enjoy various government incentives and cost advantages," he added.
The business group boss said the industry supports the development of local raw material producers, but argued that the government could have offered subsidies, low-cost financing or other incentives instead of increasing costs for downstream industries.
Industry representatives also fear the policy may encourage more imports under bonded warehouse facilities. Since exporters can import raw materials duty-free under bond licences, higher local production costs may make imported yarn and fabric more attractive, increasing pressure on foreign exchange reserves.
Who benefits?
Industry stakeholders say the main beneficiaries of the duty hikes are likely to be Meghna Group and TK Group.
Meghna Group's Meghna PVC Limited produces both PVC and PET resins. Higher import duties could strengthen its position in the domestic market.
However, BM Islam, senior executive director of Meghna Group, rejected claims that local supply is inadequate.
"We can meet around 65% of PVC resin demand and nearly 100% of PET resin demand. If demand rises, we can further expand production," he told TBS.
In the polyester staple fibre market, TK Group's Modern Poly Industries Limited and Modern Syntex are the main domestic producers.
A senior company official, speaking on condition of anonymity, said their current production capacity is equivalent to around 48% of domestic demand.
"A 5% duty is not excessive protection. If Bangladesh wants to build local industries, some level of protection is necessary. Otherwise, we will remain dependent on imports," he said.
He added that stronger local raw-material industries will be essential after Bangladesh graduates from its least-developed-country status and faces stricter local value-addition requirements.
Textile mill owners, however, argue that higher costs for downstream manufacturers could ultimately discourage local production and encourage greater reliance on imports.
