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The Textile Magazine
JUly 2012
Time-bound debt rescheduling
The protracted suspense over debt resched-
uling having finally ended with the approval
secured for it both from the Textile Ministry
and the Reserve Bank, decks are now cleared
for working out a viable strategy to save thou-
sands of cotton textile mills in the country
from the worst-ever debt crisis they are in for
over an year. Most of them have either closed
down or are rather operating far below capac-
ity. Total exposure of banks to the industry is
Rs. 1,56,000 crores, and the proposed restruc-
turing package involves Rs. 35,000 crores.
The operating losses of mills are more pro-
nounced in the case of cotton yarn and lower-
end fabric manufacturers in view of the extreme volatility in cotton prices,
making them more prone to liquidity risks. The earlier debts are restructured,
the better for mills that can start rescheduling their operations for survival.
With details of borrowers in the textile and clothing sectors having been
collected by CITI and submitted to the Ministry, a formal start for the re-
structuring process was made when a two-member inter-ministerial com-
mittee recently met representatives of the textile and banking sectors. It was
resolved at the meeting that banks would open a special window to deal with
applications for debt recast. After receiving still more details from industry
associations regarding units needing restructuring, banks are expected to ini-
tiate the loan rescheduling exercise on August 1 and hopefully complete it in
90 days. If executed successfully, the project will provide the much-needed
breathing space for mills all over the country.
The moot point here is whether the textile units would enjoy the benefits of
the Technology Upgradation Fund Scheme (TUFS). The Textiles Minister,
Mr. Anand Sharma, has dispelled fears over the issue and has asserted that
TUFS for the industry would continue in the 12th Five-Year Plan with an al-
location of Rs. 15,886 crores against Rs. 12,000 crores earmarked in the 11th
Plan. Determined as he is to restore the ailing textile sector to health, the
Minister has exhorted the industry to explore new markets in Latin Ameri-
can, African and Asian countries since the traditional Western market de-
mand is on the wane. He is fully confident that, with the proposed financial
packages being worked out for the powerloom and silk sectors, the textile
industry as a whole will soon regain its traditional strength and competence.
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TEXTILE MAGAZINE
THE
R. Natarajan,
Managing Editor & Publisher