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    Home»Commodities»Bangladesh unrest brings export of key commodities to a standstill
    Commodities

    Bangladesh unrest brings export of key commodities to a standstill

    August 6, 20246 Mins Read


    The current political turmoil in Bangladesh has brought to a halt exports of cotton, vegetables – particularly onion – and oilmeals from India, while entrepreneurs who have established manufacturing bases in the neighbouring country are facing challenges in meeting delivery schedule.

    Also at stake are seafood exports and imports of high-quality jute that are re-exported as value-added jute products. However, the impact will likely be for the short-term, while the textile and jute sectors may gain in the long term as buyers abroad look for a safe destination for timely delivery.

    Weeks of violent protests in Dhaka led to Prime Minister Sheikh Hasina Wajed resigning on Monday and leaving for India for a “very short stay”.

    Top export market

    Data gathered by businessline show that Bangladesh is a top-10 export market for India, with exports totalling $11 billion in 2023-24. It is a top-5 destination with which it has a trade balance of $9.2 billion. The export basket is well diversified from perishables, cotton, iron and steel, automobiles and components, to spices, India export a diverse set of goods to the neighbouring country. 

    FIEO Director-General and CEO Ajay Sahai said the disruption in trade is a cause of concern, particularly perishables.

    “Bangladesh is a very important export market for us. Trade has been impacted over the last fortnight. There were issues with clearances and logistics. We are concerned with the export of perishables. We hope things will get better because they also require perishables,” he said.

    “Cotton exports to Bangladesh have come to a complete halt. Since last month there has been no export of cotton and yarn to Bangladesh,” said Ramanuj Das Boob, a sourcing agent for multinationals and domestic firms from Karnataka’s Raichur.

    “Some quantity meant for Bangladesh is stocked here and at Bangladesh bordering cities like Bangaon. We don’t know when it will open up,” Das Boob said.

    Bangladesh is the main destination for Indian cotton exports. India’s raw cotton exports to Bangladesh, including waste, stood at $633 million during 2023-24. Bangladesh accounted for over half of India’s raw cotton exports, including waste valued at $1.12 billion during 2023-24.

    However, Atul Ganatra, President, the Cotton Association of India, said the ongoing crisis will not impact exports. “This is a slack season. So hardly any effects,” Ganatra said.

    Anand Popat, a Rajkot-based trader in cotton, yarn, and cotton waste, said in the short term India could suffer a reverse in cotton exports.

    “There will be little impact on cotton yarn, though trade in cotton and yarn has been halted. But in the long-term, India could stand to gain as buyers abroad could turn to India for garments,” he said. 

    Terming as unfortunate the turbulence in Bangladesh, Prabhu Dhamodharan, Convenor of the Indian Texpreneurs’ Federation, said Bangladesh’s monthly apparel exports are $3.5-3.8 billion, and this current unrest will create fear among international buyers, particularly concerning delivery times. 

    “As a de-risking strategy, buyers may divert some orders to other countries, including India. With our monthly run rate of $1.3-1.5 billion in apparel exports, we can handle an additional $300-400 million in monthly volumes,” he said.

    A healthy Bangladeshi apparel sector is crucial for the Indian spinning and fabric sectors. Due to their lack of capacity in spinning and fabrics, their dependency on India is high. “We expect normalcy in at least a week in terms of trade. In such a case, there will be strong momentum for yarn exports to fill the gap created by their local production issues,” he said.

    Oilmeal exports

    Terming Bangladesh as a major trade partner, BV Mehta, Executive Director of the Solvent Extractors’ Association of India (SEA), said India exported about 9 lakh tonnes (lt) of oilmeals – 4.3 lt each of soyabean meal and rapeseed meal, and 30,000 tonnes of rice bran extractions – in 2023-24, accounting for 18 per cent of total oilmeals exports.

    Most of these are exported by train and road. Stating that unrest in Bangladesh will impact India unless it is stopped, he said: “We have to stop our exports for the time being. Let us wait and watch when the normalcy returns.”

    A prominent onion trader said over the past three days, no onion trucks has crossed the border into Bangladesh, the primary export destination this year.

    “Some onions were previously being exported to Bangladesh on a Letter of Credit (LC) basis, but the situation has changed dramatically,” said the trader.

    “Currently, no truck is crossing the border, and vegetables are not being exported. Traders in Bangladesh indicate that it will take a few days for the situation to normalize. The main issue is the lack of available banking channels, making business transactions impossible,” he said.

    He said 2024 has been the worst year for onion exports, with Bangladesh being the only significant outlet, which is now also closed.

    Seafood exports

    Seafood exports to Dhaka are at stake, though the quantity is “negligible”, official sources said. India exported 58,701 tonnes of seafood worth ₹318 crore to Bangladesh in 2023-24, which mainly consists of dry fish and a limited quantity cuttle fish Rohu from Andhra Pradesh. Dry fish from Gujarat and Chennai also find their way into in Bangladesh. These low value fish are mainly exported by road through the border check posts in trucks, official sources said.

    A jute industry insider said imports of high-quality jute from the neighbouring country are at stake. The jute imported from Bangladesh are re-exported as value-added products to the US, Europe and Africa nations. “Right now, there is no problem as the industry had stocked up in advance and may not need the material for another 3 months,” the insider said.

    An industry source said the country may gain from exports of jute products too as Bangladesh’s situation could force buyers to turn to India.

    Manufacturing sector

    The political turmoil in Bangladesh has impacted some Indian businesses who set up manufacturing bases there. M Rafeeque Ahmed, Chairman of Farida Group, said his shoe manufacturing facility there was hit by the shutdown. “We are to meet European delivery orders. We hope normalcy is restored,” he said.

    (With inputs from Sindhu Hariharan in Chennai, Vishwanath Kulkarni in Bengaluru, Radheshyam Jadhav in Pune, Vinayak AJ in Mangaluru, Mithun Das Gupta in Kolkata and Sajeev Kumar V in Kochi)

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    Published on August 6, 2024





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