Faced with declining demand in India and abroad, the highly export weighted and labour intensive textile and clothing industry has urged Government for proper policy support. In a statement here, Mr. R.K. Dalmia, Chairman, Confederation of Indian Textile Industry (CITI) stated that the textile and clothing industry which is the largest employer in India´s manufacturing sector and one of India´s largest exporting industries is currently going through a very tough time and unless remedial measures have taken by the Government immediately, a large number of units will have to close, throwing lakhs of workers out of jobs.

Mr. R.K. Dalmia explained that the international credit crisis which has also spread to the Indian economy has resulted in a negative growth both in the case of production and exports by the textile and clothing industry. There are reports of spinning mills and garment units getting closed in different parts of the country and the fabric industry which is highly decentralized is also facing serious problems.

While the international credit crisis is beyond the reach of Indian the Government, the present crisis of the textile industry could have been prevented with proper policy support from the Government. One of the major problems that the industry faced today is liquidity crunch since the banks are not in a position to extend loans and where they provides loans, the interest rates are too high. Over Rs.2000 crore is pending with Government by way of Technology Upgradation Fund Scheme (TUFS) assistance which has not yet been released for the period beyond September 2007.

Mr. Dalmia urged the Government to make an additional provision of Rs.2000 crore immediately for TUFS for the current year so that the backlog of last year and the current year can be met. If it is impossible to provide such funds immediately, some relief measures will be required to improve the cash flow of the industry. Mr. Dalmia suggested in this regard that soft loans at concessional rates may be extended to textile and clothing industry against pending Government dues including TUFS assistance pending for a long period.

Mr. V.K. Ladia, Chairman of CITI´s Sub-Committee on Investments stated that the delay in disbursement of TUFS assistance has contributed substantially to the current working capital problems of the textile and clothing industry. Government should either provide sufficient funds immediately or make loans available against pending TUFS claims at nominal interest, he added.

The cotton scenario is another area where Government has aggravated the problems of textile and clothing industry. Mr Shishir Jaipuria, Deputy Chairman, CITI stated that Government announced an increase of around 40% in Minimum Support Prices for Cotton for 2008-09. With the textile industry facing serious cash flow problems and credit crunch, cotton consumption is expected to decline significantly during cotton year 2008-09. This will naturally push down cotton prices. Average cotton prices in India was around Rs.19000 a candy in November 2007 which increased to around Rs.29,000 a candy a few months back.

However, because of the problems of the textile industry, cotton prices have now declined and in the face of declining consumption, prices are further likely to come down to around Rs.20,000-21,000 a candy. The Minimum Support price (MSP) announced by Government is 15 to 20% above the projected market price. ��This would mean that most of the cotton will have to bought by the Government through MSP operations. Huge funds will be required for cotton procurement and huge losses will be suffered by Government for disposing it of at market prices��, Mr. Jaipuria added.

Because of in-sufficient infrastructure for such large scale procurement operations, the current crisis of the textile industry would spread to the farming sector during the peak arrival season of November 2008?February 2009. Leaders of textile and clothing industry who addressed the press today suggested that Government should take prompt and concrete measures to enable textile industry to purchase and stock cotton or the remaining part of the current cotton year. This would be possible if working capital for cotton purchase is provided for a period of 9 months against the current 3-4 months at an interest rate of 7% applicable to agri products and the margin money for such working capital is reduced from the current 25% to 10%.

Power shortage is another major issue that the textile industry is currently facing. Mr. S.V. Arumugam, Vice Chairman, CITI who is also Past Chairman of SIMA stated that in Tamil Nadu, effectively there is a power cut of 50% at present and the situation is only likely to worsen in the coming months. Mr. Arumugam suggested that Government should encourage captive generation of power by textile units by reimbursing them the difference between the cost of self-generation and the cost of grid power.

Mr. Arumugam stated that Tamil Nadu accounts for 40% of spinning activity in India and 30% of the entire industrial activity in the textile chain. Most of the units in the textile chain in Tamil Nadu are currently facing the risk of closure unless remedial measures are taken immediately. Around 3000 mw of captive power is available in Tamil Nadu and by giving exemption to SKO, LDO and furnace oil for customs and excise duty to a certain extent the problem can be reduced. By doing so, the huge investment that has already taken place, for captive generation of 3000 mw will immediately come into operation and the mills can reduce the power problem.

Mr. R.K. Dalmia explained that the power situation in other textile producing States is also bad, though the situation is not as critical as in Tamil Nadu. Mr. Dalmia requested Government to take remedial action for improving the power situation, or to remove customs duties and excise duty on fuel used for self-generation of power. Mr. R.K. Dalmia pointed out that a substantial reduction in drawback rates had been effected by Government recently, while competing countries like Pakistan and China have effected substantial increase in export incentives.

Source: www.ccct.org