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CITI urges government to rescue textile industry

05
Nov '08

Faced with declining demand in India and abroad, the highly export weighted and labour intensive textile and clothing industry has urged Government for proper policy support. In a statement here, Mr. R.K. Dalmia, Chairman, Confederation of Indian Textile Industry (CITI) stated that the textile and clothing industry which is the largest employer in India's manufacturing sector and one of India's largest exporting industries is currently going through a very tough time and unless remedial measures have taken by the Government immediately, a large number of units will have to close, throwing lakhs of workers out of jobs.

Mr. R.K. Dalmia explained that the international credit crisis which has also spread to the Indian economy has resulted in a negative growth both in the case of production and exports by the textile and clothing industry. There are reports of spinning mills and garment units getting closed in different parts of the country and the fabric industry which is highly decentralized is also facing serious problems.

While the international credit crisis is beyond the reach of Indian the Government, the present crisis of the textile industry could have been prevented with proper policy support from the Government. One of the major problems that the industry faced today is liquidity crunch since the banks are not in a position to extend loans and where they provides loans, the interest rates are too high. Over Rs.2000 crore is pending with Government by way of Technology Upgradation Fund Scheme (TUFS) assistance which has not yet been released for the period beyond September 2007.

Mr. Dalmia urged the Government to make an additional provision of Rs.2000 crore immediately for TUFS for the current year so that the backlog of last year and the current year can be met. If it is impossible to provide such funds immediately, some relief measures will be required to improve the cash flow of the industry. Mr. Dalmia suggested in this regard that soft loans at concessional rates may be extended to textile and clothing industry against pending Government dues including TUFS assistance pending for a long period.

Mr. V.K. Ladia, Chairman of CITI's Sub-Committee on Investments stated that the delay in disbursement of TUFS assistance has contributed substantially to the current working capital problems of the textile and clothing industry. Government should either provide sufficient funds immediately or make loans available against pending TUFS claims at nominal interest”, he added.

The cotton scenario is another area where Government has aggravated the problems of textile and clothing industry. Mr Shishir Jaipuria, Deputy Chairman, CITI stated that Government announced an increase of around 40% in Minimum Support Prices for Cotton for 2008-09. With the textile industry facing serious cash flow problems and credit crunch, cotton consumption is expected to decline significantly during cotton year 2008-09. This will naturally push down cotton prices. Average cotton prices in India was around Rs.19000 a candy in November 2007 which increased to around Rs.29,000 a candy a few months back.

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