The protracted suspense over debt rescheduling 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 thousands 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 capacity. Total exposure of banks to the industry is Rs. 1,56,000 crores, and the proposed restructuring package involves Rs. 35,000 crores. The operating losses of mills are more pronounced 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 restructuring process was made when a two-member inter-ministerial committee 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 initiate 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 allocation 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 American, African and Asian countries since the traditional Western market demand 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.