The government is contemplating a financial package to unburden handloom sector of overdue loans, on the lines of farm debt relief extended to small and marginal farmers earlier this fiscal. The finance ministry is considering a proposal, sent by the textiles ministry two weeks ago to release a package worth Rs 2,600 crore for handloom weavers, who had taken loans but could not repay the same as on March 31, 2007.
The proposed package has two main components: Waiver of overdue loans and interest as on March 31, 2007 in respect of primary weaver societies and apex societies; and fresh credit at 7% interest with interest subvention to Nabard and banks.
?This package has been devised to facilitate easy credit that was chocked due to weavers? inability to pay the earlier loans, something that happened in the agriculture sector,? a senior official from the textiles ministry said. Earlier this year, the government extended a Rs 71,680-crore debt relief package to small and marginal farmers to facilitate fresh loans to the sector.
In return of the facility, the cooperative societies have to adopt legal and institutional reforms. ?The cooperative societies would have to organise regular elections and undergo audit that would ensure their financial health,? another official said. The package would be financed by the Union government, states and Nabard, for which a tripartite memorandum of understanding has to be signed. The Centre?s share would be Rs 1,980 crore, or 75% of the total, while states would have to give Rs 488 crore (20%).
State cooperative banks would have to forego Rs 122 crore and Nabard Rs 10 crore. Prime Minister Manmohan Singh first initiated the package in 2006. At that time, an expert committee had estimated that the sector would need Rs 1,000 crore to release weavers from the clutches of overdue loans. ?At that time, certain clarifications were asked from us. Now, we have submitted a fresh proposal clarifying all the aspects of the package,? the senior official said.
There are about 30,000 weaver cooperatives in the country. A majority of weavers exist in southern states like Andhra Pradesh and Tamil Nadu. Handlooms operate with obsolete technology and machines, as a result their performance is weaker than that of powerlooms. In 2006-07, cloth production in the handloom sector was 53,389 million square metre, 62% of the total cloth production by the textiles industry. On the other hand, production by handlooms was 4,001 million square metre. More than 65 lakh people are engaged in weaving and associated activities in the handloom sector, as per the joint census of Handlooms and Powerlooms 1995-96.
Due to weak financial position, 226 handloom weavers have committed suicide only in Andhra Pradesh between April 1997 and October 2008. ?Weavers committed suicide due to prolonged addiction to alcohol, inadequate wages, indebtedness and resultant harassment by micro-finance companies,? minister of state for textiles E V K S Elangovan told Rajya Sabha on October 22.
According to the proposal, Rs 1,094 crore would be utilised to write off the accumulated losses of the cooperatives, Rs 366 crore would go toward cleansing the receivables from state governments and the Centre on account of sales rebate and subsidies. The government would direct Rs 855 crore to writing off the overdue loans and interest, Rs 95 crore for interest subvention, while Rs 60 crore would be used to create handloom development and equity fund. The Credit Guarantee Fund Scheme would release Rs 5 crore, while Rs 106 crore would be used to replace the old stocks with primary weaver societies. The government would also create a contingency fund, which would have a corpus of Rs 19 crore.
