The finance ministry’s decision to restructure debt worth about Rs 35,000 crore to the textile industry has offered relief to the textile industry in Tamil Nadu, the largest in India.
The industry in the state, likely to see restructuring of debt worth Rs 17,000 crore, is struggling, owing to the crisis in Europe and the rupee fluctuation.
S Dinakaran, chairman, The Southern India Mills’ Association, said the news of debt restructuring had brought great relief to the ailing textile industry. This would also help textile mills in Andhra Pradesh, which had incurred huge losses last year.
“Since the textile units have already started making marginal profits,the industry would revive soon and perform well. The industry would be in a position to pay the interest and improve its liquidity position with the announcement of the package,” he said.
According to the Association estimate, in Tamil Nadu alone the debt restructuring of Mills would be around Rs 15,000 crore and number of units likely to be benefited will be around 600-700, most of them would be small and medium enterprises (SMEs).
A Sakthivel, president, Tirupur Exporters Association (TEA), which represents the Rs 12,500 crore knitwear industry, which is the country's largest, from Tirupur said that around debt to the tune of Rs 1000-1200 crore will be restructured in Tirupur and around 200 SMEs will be benefited from this move.
He added, the Finance Ministry would recommend to RBI not to classify the units asset as NPA after providing special dispensations in NPA rules and also allowing a two year moratorium on term loan to the Textile industry and converting the eroded working capital into working capital term loan repayable over a period of three to five years.
He added, the knitwear garment export sector and other stakeholder units in Tirupur have been eagerly awaiting with bated breath for the positive announcement mainly to tide over the crisis since they are struggling to service their loan and interest further to slowdown of exports. He further noted that the debt restructuring to the units at this juncture will be a major relief to all and certainly lift the sagging morale of the textile industry.
Commenting about the textile industry in Tirupur, Sakthivel said, “as the currency is depreciating, customers are asking for rate cut, which we have done to the tune of 3-4 per cent. If we dont do, the customers will go to other countries”.
Industry is still struggling, said another exporter from the textile town, due to the European crisis and increase in power and capital cost. “No new orders are coming from our traditional markets of Europe and the US, whatever the orders which are coming is not viable”.
The industry is now looking at new markets like Japan, Israel, Russia, South America and South Africa.
“With the entry of new markets and going by the current Rupee value against Dollar we are hoping to close the current fiscal with a total turnover of around Rs 14,000 crore as compared to Rs 12500-12800 crore last year,” said Sakthievel.