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'Govt should help sustain role of T&C sector' - CITI

24
Nov '08

According to a recent presentation made by the Confederation of Indian Textile Industry (CITI) to the Commerce Secretary Mr Prasad, there are 35 million people employed in the textile industry in India and just a 1 percent decline in production will lead to loss of 3.5 million jobs.

As of date an estimated 700,000 jobs have already been lost and an additional 500,000 more are projected to lose their jobs by March 2009. The various constraints through which the industry is passing are high raw material cost, power and interest costs and delay in disbursal of government dues leading to erosion of working capital.

While considering turnover and net profits of the top fifty companies in the second quarter of the current fiscal (2008-09) vis-à-vis the same quarter of the previous fiscal, although, turnover has grown to Rs 84,140 million from Rs 68,280 million, it has led to a massive loss of Rs 2,060 million in the second quarter of the current fiscal from a net profit of Rs 2,230 million in the same period last fiscal.

The losses are expected to grow even higher in the last two quarters of 2008-09. The biggest brunt is being faced by the small units which have already cut their production capacities by 25-50 percent.

50 percent of all textile production in the country is exported. The markets of US, Japan and the EU put together account for 60 percent of all shipments from the industry. But the biggest impact of this crisis has been felt by these three countries, due to which exports are projected to fall further in the next few months.

USA's import of textile products from India during January-August 2008 declined by 1.56 percent in value terms, compared to the same period of 2007 and for garments the decline was higher at 4.80 percent. The imports demand of Indian textiles in EU and Japan is declining on similar trend, though data is not yet available.

The competitor countries like China and Pakistan have doled out sops to their industries. China for instance has increased it export drawback rates three times in the last four months and more sops are expected to be given in the next few months like more access to working capital at low interest rates etc.

Pakistan on the other hand has granted R&D assistance of 6 percent and a 5 percent refund on interest paid on loans for machinery purchase. A 3 percent interest subvention for the spinning sector and a two year moratorium on repayment of the principal amount and interest on term loans taken by the textile and garment industry.

According to CITI, the government is also partly to blame for escalating the crisis in the sector. Interest subvention of 4 percent on export credit was withdrawn six months before its scheduled expiry along with a steep reduction of draw back rates.

Recently to add flame to the already lit fire, the government announced a 25-40 percent hike in Minimum Support Prices (MSP) of cotton which has led to prices of cotton rising to high levels without the necessary retunes being available in the final products.

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