CITI urges government to rescue textile industry

05 Nov '08

6 min read

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.

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