Even as the government is getting ready to undertake a nationwide survey of over 800 companies to find out the exact job losses in India due to the global financial crisis, the first report of pink slips is out.
According to estimates of the textile ministry, there will be job losses of about five lakh in the next five months. This was disclosed by commerce secretary GK Pillai on the sidelines of a government-industry interaction organised by Ficci.
In a presentation made before the commerce secretary, Shishir Jaipuria, deputy chairman, Confederation of Indian Textiles Industry, said the growth of the textile sector fell from 5.2% in April-September 2007 to a minuscule 0.3% in the same period this fiscal.
He said the textiles and clothing industry employs 35 million workers directly, adding that already 7 lakh jobs are estimated to have been lost and another 5 lakh would lose jobs by March 2009.
Financial results of 50 major textile companies listed in the Bombay Stock Exchange shows that though turnover increased, profits became negative in the second quarter this year. In the remaining last two quarters, even turnover will decline, he warned. Smaller units are already suffering significant production loss, Jaipuria added.
For instance, the profitability of renowned companies like Bombay Dyeing fell from (-)370% in the first quarter over the same quarter last year, to (-)828% in the second quarter as against last year?s Q2.
Over 50% of textile products manufactured in the country is being exported. US, EU and Japan constitute over 60% of our textiles exports. All the three countries are in a recession mode.
US?s import of textile products from India during January-August 2008 declined by 1.56% in value terms, compared to the same period of 2007. For garments, the decline was higher at 4.8%. The imports demand of Indian textiles in EU and Japan is declining on similar trend, though data is not available yet.
According to Jaipuria, the government decisions that aggravated the crisis include withdrawing interest subvention of 4% on export credit six months before its scheduled expiry, drastically reducing Draw Back Rates for textile and clothing products, increasing the Minimum Support Prices for cotton by of 40%.
Besides, there is only a provision of Rs 300 crore for TUFS in the Supplementary Budget, against the requirement of over Rs2000 crore for clearing present backlog, he said.
The demands of the sector include reinstating the interest subvention of 4% on export credit, at least for the initially announced period of up to 31st March 2009, increasing the drawback rates, reimbursing 4-6 % state level duties that are not refunded to exporters by either the Centre or state governments, clearing the backlog in TUFS assistance and other government dues as well as extending the post shipment validity of export credit to 180 days.
On issues of power shortage, the sector recommended that the government should encourage captive generation by abolishing customs and excise duties on liquid fuels for the sector, reimburse the cost difference between grid power and self generated power and provide gas to textile and clothing units, wherever feasible, at Administered Price Mechanism rates.
The government must also allow a moratorium of two years on repayment of term loans taken by textiles and clothing industry and relax NPA norms to accommodate this, Jaipuria said. The government also should extend the period for repayment of TUFS loans from the current 10 years to 12 years.
On measures for improving liquidity, the sector said the government must enable mills to buy cotton by providing them working capital loans at 7% interest at par with the rate applicable to agri products, against a margin of 10% and for a period of 9 months, mandate Cotton Corporation of India to sell all procured cotton to Indian mills without holding it and creating an artificial shortage in the market, and also mandate CCI to sell cotton to domestic mills at market price through auction or at a price equal to the f.o.b. export price available to it minus the cost of export involved.
The relief package can avert a possible loss of 10-12 lakh jobs and increase India?s market share in USA, EU and Japan. The package can also save huge investments made by the industry in capacity building during the last few years from idling. It would also avert the possibility of a large number of term loans turning into NPAs and arrest the decline in cotton consumption and the resultant farmers? distress.
On the strategy of competitors, China has already announced a 2-4% increase in the rates of VAT refund on textile and clothing exports to take them to 13% announced in July 2008 and in October, they increased it further to 14%. Pakistan has increased R&D assistance to garment exporters by 6% and announced an increase of 5% refund of interest paid on loans for machinery purchase by the sector.
Jobs at stake
• Already 7 lakh jobs are estimated to have been lost
•The sector employs 35 million workers directly
•Growth of the textile sector fell from 5.2% in Apr-Sep 2007 to a minuscule 0.3% in the same period this fiscal
•The US, EU and Japan constitute over 60% of our textiles exports. All the three countries are in a recession mode
•China has already announced a 2-4% increase in the rates of VAT refund on textile and clothing exports to take them to 14% in October