"During the 1997-98 budget, the then Finance Minister P Chidambaram withdrew the exemption abruptly. This has affected the financial viability of small mills badly and many are facing closure," SISSPA president A V Ramaraj told reporters.

Of the 1,500 small mills in the country, over 1,000 were located in Coimbatore and Erode districts of Tamil Nadu, he said. "If timely support is not offered, the mills would have to be closed down once and for all throwing out ofemployment several lakh workers, especially women, in rural areas," he added.

The issue had been raised with Tamil Nadu government also and state Chief Minister M Karunanidhi had taken up the matter with the Prime Minister. Ramaraj said SISSPA had asked Sinha to not only restore the excise benefit but also extend it to Rs 50 lakh. Criticising the government's decision to leave stand-alone spinning mills from the purview of the Rs 25,000 crore Textile Upgradation Fund (TUF), he wondered how modernisation in weaving and processing sectors would help improve quality without improvement in yarn quality.

"Quality yarn is the base for a good fabric. If stand-alone spinning mills are to be left out, how can we ensure quality textile goods?" he asked.The Government, while announcing the launch of TUF from Marchone, said spinning mills would be eligible for the fund only if they go in for weaving. Asked about Government's contention that spinning mills had benefited from an earlier scheme during the eight plan,Ramaraj said hardly 15 per cent of the total spinning mills had availed the funds then. "Over five years have passed since then. Those modernised units would have become outdated now," he said.

The Government should also appoint an agency to import 15 lakh bales (of 170 kg) of cotton since global prices of cotton were cheaper than domestic prices, he said. Higher cotton prices in 1997-98 was one of the reasons for textile industry's problems. Getting cheap raw materials will definitely help small mills, he said.