Interviews
High stakes at peril if timely assistance not forthcoming
14 Jan '09
5 min read
The industry is looking towards the government to help the sector tide over the crisis, just like has been done by the Chinese government for the textile and garment industry in that country, by consecutively increasing the duty draw back scheme three times in 2008 along with providing other subsidies and incentives to the sector.
The damage done by the arbitrary increase in MSP of cotton has already run through its full course. But the government can still undo the damage by disposing cotton procured by the Cotton Corporation of India at international prices. It can also relax working capital norms specifically for cotton by reducing interest to 7 percent as against PLR at present.
It can also decrease the margin money needed in purchase of cotton from 25 percent to 10 percent and increase the validity to 9 months from the current 3-6 months. It can also do well by easing the financial position of the sector with a 2 year moratorium on term loans and provide interest on all delayed government dues.
Also give assistance on TUFS and TED through exemption and not reimbursement and restore DBK rates reduced in September 2008. The other measures which could help the sector cruise through the crisis are providing export credit at 7 percent interest and derivative losses to be funded by banks on a soft loan of 6 percent.
If these measures are undertaken by the government, it will help the tottering industry stand on its feet and all put together have an annual impact of around Rs. 55 billion. These benefits should be extended for a period of 2 years and will help create an additional 2.5 million jobs.
They will also help increase exports by 10 percent in the next fiscal year (2009-10) and thereby take the Indian share of global textile trade to 6 percent from the current 4 percent. But the biggest benefit, will be that it will obviate the Rs 1,000 billion invested in the sector in the last few years from turning in to non-performing assets (NPA's).
The damage done by the arbitrary increase in MSP of cotton has already run through its full course. But the government can still undo the damage by disposing cotton procured by the Cotton Corporation of India at international prices. It can also relax working capital norms specifically for cotton by reducing interest to 7 percent as against PLR at present.
It can also decrease the margin money needed in purchase of cotton from 25 percent to 10 percent and increase the validity to 9 months from the current 3-6 months. It can also do well by easing the financial position of the sector with a 2 year moratorium on term loans and provide interest on all delayed government dues.
Also give assistance on TUFS and TED through exemption and not reimbursement and restore DBK rates reduced in September 2008. The other measures which could help the sector cruise through the crisis are providing export credit at 7 percent interest and derivative losses to be funded by banks on a soft loan of 6 percent.
If these measures are undertaken by the government, it will help the tottering industry stand on its feet and all put together have an annual impact of around Rs. 55 billion. These benefits should be extended for a period of 2 years and will help create an additional 2.5 million jobs.
They will also help increase exports by 10 percent in the next fiscal year (2009-10) and thereby take the Indian share of global textile trade to 6 percent from the current 4 percent. But the biggest benefit, will be that it will obviate the Rs 1,000 billion invested in the sector in the last few years from turning in to non-performing assets (NPA's).
Fibre2fashion News Desk - India
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