Liquidity crisis grips Indian textile sector

30 Jul '11

2 min read

Textile mills in the country could be in trouble with banks in the coming days. It may prove to be difficult to access working capital, considering that there still prevails economic uncertainty in the European Union, which is a major market for Indian clothing.

According to a report of the Confederation of Indian Textile Industry (CITI) the overall textile and apparel sector lost a staggering Rs 110 billion, as unprecedented volumes of inventories have built up with companies, as domestic as well as overseas buyers are reluctant to place new orders.

This has put extreme pressure on the liquidity position of the textile and apparel manufacturers.

To top it, spinning mills alone will have to fork out around Rs 70 billion this year as repayment of principal and interest for the loans they had taken for expanding and modernization of spinning units in the last ten years.

This does not include the loans taken by other segments of the textile and apparel sector to either expand or put up new plants.

CITI is of the opinion that the government should announce a relief package for the whole sector in order that companies do not default on their loans or close down, considering the fact that their repayment capacity has declined.

Fibre2fashion News Desk - India

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