This committee would be headed by the leading chartered accountant firm, Fraser and Rose and will also have representatives from the South Indian Mills Association (Sima), South India Textile Research Association (Sitra), senior officials from banks and financial institutions besides the officials from the Kerala State Industrial Development Corporation (KSIDC).

The broad agenda before the committee would be to study the ongoing crisis faced by the textile industry in Kerala and suggest measures to tackle these issues at both the centre and the state level. The report of the committee is expected by the end of this year.

With the constitution of the committee round the corner, Sima has meanwhile submitted a detailed memorandum to the state government, outlining reliefs required from the central as well as the state government.

The major reliefs sought from the state government includes instructing the KSIDC to reschedule the loans given to some mills in Kerala, closure of all unviable units in the public sector in Kerala which are being sustained by pumping tax payer's money, roll back of the electricity charges to the rate prevailing before May 15, 1999, when the tariff was raised by 40 per cent, reduction in sales tax on man made and synthetic yarns from the existing 5 per cent to 1 per cent and allowing the mills to retain the sales tax payable by them for a period of three years as a non interest bearing term loan which can be repaid from the fourth year onwards.

It may be noted here that Kerala accounts for 36 textile mills with a capacity of about 10 lakh spindles. Nearly 20,000 workers are directly dependent on this industry for their livelihood besides thousands of others in handloom, powerloom and garment sectors, who are also depending on this industry.

As per Sima, the factors responsible for the crisis in the textile industry in the state have been the steep rise in cotton prices, ever increasing cost of production and the general recession in the economy resulting in sluggishness in off-take of yarn and cloth. One of the major factors affecting the economic working of the textile mills in the state, as per Sima, has been lack of adequate bank credit, particularly, working capital.

Therefore, there is a need to rehabilitate the ailing textile industry by asking the banks and financial institutions to relax their norms so that there is a free flow of credit.

KSIDC, which is giving loans to the units in the state, has been charging very high interest rates to the tune of 20 per cent as compared with the normal commercial bank rates of 14 to 15 per cent. Sima has urged the government to reduce the interest rates being charged by KSIDC and bring it down to 16 per cent. As per Sima, there are a number of textile mills run by the Kerala government as well as the co-operative sector which are incurring heavy losses but are sustained by the government by pumping in tax payers money, only for the sake of protecting the employment in these mills.

Consequently these mills are compelled to sell their products at very low prices thus making it impossible for the private sector mills to compete with them. It is therefore advisable that the state government allow these mills to be closed down with due compensation to the retrenched workers, points out Sima in its memorandum submitted to the state government.

As yet another shot in the arm of the Kerala mills, the sinking mills in the state have been subjected to a hike in power tariff from the middle of May 1999. Although the government decided to reduce the increase by 5 per cent, from 40 per cent to 35 per cent, the burden cast on the mills is still very heavy. As for instance, on account of power tariff, a 25,000 spindle mill in the state will have to bear an additional burden of Rs 6 lakh per month.

Sima has therefore asked the government to treat the mills in Kerala as a special case and exempt them from the recent hike in power tariff, which would help ease the financial burden on these units.