The Hindu Business Line : Textile industry seeks Govt relief to tide over credit crunch

New Delhi, Nov. 6 The textile industry has warned of large-scale job losses on account of spinning mills and garment units closing down operations across the country due to the ongoing credit crunch and a dip in both domestic and overseas demand.

Textile players, led by the Confederation of Indian Textile Industry (CITI), have sought the Centre’s intervention for a policy support to combat the decline in demand and capital crunch.

“The industry is in deep trouble. Nearly 20-25 per cent of the sector has already scaled down operations due to a decline in demand. If such a situation continues, the shut downs would increase and there would be large-scale job losses,” Mr R.K. Dalmia, Chairman of CITI, told reporters here.

Restart TUFS payouts

Claiming that the textile industry was facing an acute capital crunch, Mr Dalmia said: “One of the major problems that the industry faces today is liquidity crunch since the banks are not in a position to extend loans and where they provide loans, the interest rates are too high.” He said the Government needs to restart disbursements under the Technology Upgradation Fund Scheme (TUFS), under which it offers interest reimbursement of 5 per cent on rupee term loans to eligible projects. “Our request to the Government is to immediately release the Rs 2,000 crore under TUFS, which is held up currently for the period beyond September 2007, so that we can use it as working capital and for procuring raw material,” Mr Dalmia said.

He also urged the Centre to make an additional provision of Rs 2,000 crore immediately under TUFS for the current fiscal so that the backlog of last year and the current year can be met. He said that lower demand from the US and Europe have also hit the export sector, adding that to stay afloat, textile companies have already cut an estimated 5-7 lakh jobs over the last four months.

Mr Shishir Jaipuria, Deputy Chairman, CITI, said the Government’s announcement to hike the minimum support prices for cotton for the current fiscal by around 40 per cent has also hit the sector. Power shortage is another major issue that the textile industry is currently facing, especially in the southern parts of the country, Mr S.V. Arumugam, Vice-Chairman, CITI, said.

“Power cuts are hitting efficiency and we run at 50 per cent capacity during most days. Tamil Nadu is home to 40 per cent of the textile industry in India and power shortage, especially, doesn’t help during such hard times,” he said.

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