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SIMA urges FM for immediate debt restructuring package

12
Dec '11
The Indian textiles and clothing industry is the largest and most labour intensive industry employing 35 million people directly and another 45 million people indirectly particularly women and rural masses. The industry made a turn over of around 77 US Dollar billion in 2010-11 including exports worth US Dollar 24 billion. The textile industry is the only industry which ensures inclusive growth by providing jobs to the rural masses, high export earnings with negligible import intensity and meeting the most important basis needs of the masses.

Since the textile industry has become net exporter, any Policy relating to exports and global market demand significantly influence the performance of the industry. The raw material prices in the domestic market are driven by global commodity market trend which is highly volatile. It is a highly leveraged industry with debt constituting 78% of the capital structure. This industry also needs huge working capital to procure its annual requirement of cotton during five months being a seasonal commodity.

The Government policies relating to cotton export and cotton yarn export during the end of 2010 greatly influenced the cotton price and yarn price creating an artificial scarcity not only in the domestic market, but also in the global market. Hence, the prices were very volatile and ultimately the industry lost over Rs.11,000 crore in the working capital alone during the first quarter of the current financial year.

Simultaneously, the economic crisis in EU and closure over 1000 dyeing units in Tamilnadu pulled down the capacity utilization by over 25% resulting in cash losses for all the textile mills across the nation, particularly the industry in Tamilnadu which accounts for 1/3rd of the size. Over one million people are already out of jobs due to production cuts across the value chain.

In a Press Release issued here, Mr.S.Dinakaran, Chairman, The Southern India Mills' Association (SIMA) has stated that over Rs.2 lakh crore have been invested in the textile industry mostly under the Technology Upgradation Fund Scheme during the last decade and currently the industry has a debt of over Rs.1 lakh crore. He has said that out of 226 listed textile companies in the country over 83% have shown poorer result and 127 companies have shown net loss for the first half of the year 2011-12.

Mr.Dinakaran has stated the current crisis is the worst in the history and the magnitude of which is much higher than 2008-2009 global recession for which the Government announced a bail out package.

SIMA Chief has stated that the current crisis in the textile industry is purely beyond the control of the individual mills and hence this abnormal loss has to be treated as an exceptional loss by the banks in the books of accounts. He has pointed out the seriousness of the recession and the timely need for a financial package have been represented several times to the Government, Reserve Bank of India and Indian Banks' Association from July 2011 onwards.


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