The textile mills, including spinning units, have petitioned the Union textile ministry to come out with a slew of remedial measures to overcome the impact of demonetisation.
The withdrawal of around 86% of the currency in circulation and issuance of less than 10% of currency in the denomination of R2,000 has led to severe shortage of funds for regular operations, purchase of raw material (cotton), sale of finished goods (yarn, fabric) and also the purchase of the regular requirements of stores, spares, accessories in the textile industry.
In a press release on Wednesday, Southern India Mills’ Association (SIMA) chairman Senthil Kumar said that a representation was sent to union textile minister Smriti Zubin Irani appealing the government to announce remedial measures for mitigating the financial impact of the demonetisation of high-value currencies on the textile industry.
He said the textile retail showrooms and shops across the nation are hit by cash crunch and low sales as the customers are starving for currencies and spending the rationed currency available with them only for emergency purpose. The stocks started piling up across the value chain of the textile industry and textile units are not in a position to collect any receivables. Therefore, cash flow of the textile industry is seriously affected.
According to him, the cotton price increased by around R2,000 per candy as the cotton arrival to the market came to a grinding halt during the first 10 days after demonetisation and has currently improved to the level of 50 to 60%. “It might take at least six months for the textile industry to reach normalcy in its performance,” he said further.
Therefore, to offset the current problems of the industry, the union textile ministry should look into remedial measures such as extending 2% MEIS and 3% IES benefits for cotton yarn exports and improve its global competitiveness, enhancing the working capital limit by 50%, one year moratorium period for repayment of loans and interest, increasing the existing NPAs period from 90 days to one year, deferring all tax payments for a period of six months, advising banks not to adjust the sale proceeds of kapas against their dues, asking CCI to procure kapas at market price, reducing interest rate by 3% for all the term loans and working capital loan across the value chain, he said.