Textile debt recast flops as mills fight to avoid NPA tag

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SummaryThe much-touted debt recast scheme for textile companies seems to have come a cropper. Roughly half of the 307 textile mills which had sought a restructuring of loans worth over R12,000 crore last year are losing interest after the Reserve Bank of India declined to ease norms on non-performing assets, senior industry executives said.

under consideration. The process will be expedited,” said a senior government official.

The textile industry has now requested the government to consider easing guidelines under TUFS to allow concessions to even those mills whose loans have been declared NPAs due to the second restructuring, Nair said.

The government mainly provides interest subsidy against loans to textile units, apart from capital subsidy as well as limited cushion against exchange rate fluctuation, for investing in new technology at existing units as well as to set up new units with state-of-the-art technology so that their viability and competitiveness in the domestic as well as international markets would be enhanced. The government has allocated R11,577 crore for the 12th Plan period (2012-17) for the TUFS.

Textile mills, which bought cotton at record prices in the marketing year which started on October 1, 2010, were caught off-guard when product prices plunged in April 2011 on poor demand from the United States and the European Union, which account for around 65% of textile exports. Moreover, the government’s restrictions on cotton yarn export at 720 million kg in the 2010-11 fiscal to boost domestic supplies resulted in a loss of R11,000 crore to the textile industry, according to an estimate by CITI.

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