Tamil Nadu is the worst affected State which accounts for over one third of the textile business in the country, directly employing over 50 lakh people, fetching over Rs.50, 000 crores forex earnings and accounting for 47.5% of the yarn production capacity of the country due to added problems like acute power shortage for past four years and high transportation cost. 

The State has to procure over 95% of its raw material particularly cotton from States like Gujarat and Maharashtra by spending around Rs.5 per kg as the lorry freight and again spend the same amount to sell its produce in the upcountry particularly the power loom centres in Maharashtra.  Andhra Pradesh has also joined the wagon for the past one and half years due to severe power shortage. 

The Southern grid corridor bottleneck does not allow the Southern States to mitigate the power crisis taking advantage of the open access power purchase system.  Realizing the grave situation of the textile industry, the Centre announced a financial restructuring package of Rs.35,000 crores on 29th May 2012 to avoid further sickness in the textile industry.

Mr S Dinakaran, Chairman, The Southern India Mills Association, the largest employers' organization representing the textile industry in the country has stated that the diesel price hike of Rs.9.25 per litre for bulk purchase at one stroke for the industry has come as a rude shock to the textile industry. 

Though the price is increased by Rs.9.25 per litre, the net impact of the increase at the consuming point would work out to Rs.11.00 per litre. He has stated that Tamil Nadu textile industry is facing over 60 percent power shortage.  He has added that the State has a generation capacity of only around 7,000 MW as against the peak demand of over 12,500 MW and is relying only on diesel power generation to sustain the survival of the industry in the State.

He has said that the investment in the textile industry has become dormant during the last three years and over 20 lakh people employed in the textile industry already lost their jobs owing to power shortage. 

Mr Dinakaran has stated that the diesel price hike of Rs.11.00 litre including all levies for bulk purchase would have an implication of Rs.4/- per kg in the cost of production of 40s count yarn for the spinning sector with diesel power generation apart from substantial increase in the indirect costs like transportation and the costs of all inputs and these cost escalation would have severe cascading effect down the value chain in the textile industry.