India - Textile Industry Demands Relief Package For Survival.

The Indian textile industry has urged the government to provide them with a relief package soon as the sector is undergoing tough times due to crash in prices of yarn, declining demand both in domestic and international markets, withdrawal of export incentives and constraint with repayment of loans and interests.

"In order to avoid a large number of units becoming Non Performing Assets (NPAs) and subsequently leading to closures in a matter of months, the government should announce a relief package without any loss of time," said the Confederation of Indian Textile Industry (CITI) in a statement issued on Wednesday in New Delhi.

Observing the crisis that the textile sector is witnessing at this juncture, CITI Chairman Shishir Jaipuria said that DEPB and drawback on exports of cotton yarn should be restored immediately with effect from the dates of their discontinuance. Also, the restoration of interest subvention of 4.5 percent on export of textiles and clothing is requisite.

Further, he reiterated to withdraw excise duty of 10 percent imposed on the branded garments and clothing in the last Budget in order to stimulate the consumer demand.

CITI also proposed the government for moratorium of additional two years on repayment of all loans and interest to be allowed including TUFS loans for all units in textiles and clothing industry.

And, the reduction of margin money for purchases of cotton to 10 percent are the other relief measures, which the government should provide to the industry, CITI suggested.

Opining further, Mukund Choudhary, Managing Director, Spentex Industries Ltd and President, Northern India Textile Mills' Association (NITMA) said due to the restrictions on export of cotton yarn last year, over 300 million kgs of cotton yarn remained with the mills on 31st March 2011.

"In fact, the domestic demand, which has been declining from January 2011 onwards, continues to fall steeply and therefore the stocks with the mills have increased to approximately 500 million kgs," he added.

"The loss on 500 million kgs because of the price decline of Rs 90 per kg would work out to Rs 4500 crore. Viewed against this, the total loss to the textile industry on stocks of raw materials and cotton yarn would work out to over Rs 11,000 crore," the NITMA President added.

Also, S.P. Oswal, Chairman and Managing Director, Vardhman Textiles Ltd. added that this year world cotton prices crashed all of a sudden in tandem with the global commodity prices, after reaching unprecedented high levels.

In fact, the domestic cotton prices (Shankar- 6) increased from Rs 30,000 per candy in September 2010 to Rs 63,000 per candy during February – March 2011. It crashed to Rs 45,000 per candy in April 2011 and to Rs 38,000 per candy by the end of June 2011.

Pointing this out he also said that the Textile Mills stock cotton for 2-3 months, and most of them had bought cotton at high prices and are currently stuck with high cost cotton.

"They (Mills) have lost over Rs 15,000 per candy on about 65 lakh bales in cotton stock. This would amount to a total estimated loss of Rs 6000 crore for the industry. Coupled with drastic reduction in the prices of manmade fibres, which has incurred a loss of Rs 500 crore to the spinners, the industry losses are peaking to Rs 6500 crore approximately," Oswal added.

While, dwelling views on repayment of loans and interests, the CITI Chairman also highlighted that the spinning mills have invested more than Rs 40,000 crore during the last 10 years in capacity building and modernization, which would mean that about Rs 5000 crore per annum has to be repaid by them to the banks.

"Further, the interest payment on these loans would amount to another Rs 2000 crore. Thus, Rs 7000 crore would have to be repaid by the spinning mills to banks in the current year," he said.

So, against these imponderables and vicissitudes, a comprehensive relief package at the earliest can only ensure the survival of the textile industry,” the CITI chief added.

Source : yarnsandfibers.com