Textile min seeks 2-yr grace on bank loans

Written by Neha Pal | Neha Pal | Updated: Jul 30 2011, 07:24am hrs
The ministry of textiles is in talks with the Reserve Bank of India and the banking division of the finance ministry to provide an immediate relief package to the textile units, which have combined losses amounting to R11, 000 crore and are faltering in repayment of loans.

Keeping in view the high interest rates, the ministry has demanded a moratorium of additional two years on repayment of all loans and interests, including the Technology Upgradation Fund Scheme loans, said a textile ministry official.

The textile ministry has also asked the finance ministry to provide an interest subvention of 4.5% on exports of textile and clothing to avoid the sickness and closure of textile units that have been reeling under pressure.

The official said that the interest subvention of 4.5% had been provided during recession in the past which may be restored. Apart from this, the margin money for purchase of cotton may be reduced to 10%.

According to DK Nair, secretary general, CITI, There is a need for an immediate relief package in order to avoid sickness and closure of units in the entire value chain during the coming months which would also render million of workers unemployed.

Spinning mills have borrowed R40,000 crore during the last ten years in capacity building and modernisation which included a two year moratorium on loans.

This made an installment of R5,000 crore per annum which has to be repaid by them to banks along with an interest payment amounting to another R2,000 crore. "The mills are in deep crisis and are not in a position to repay R7,000 crore to banks during the current year," said Nair. The other segments in the value chain also have huge repayment commitments.

According to Mukund Choudhary, managing director of Spentex Industries, "Spinning mills are suffering huge losses due to lack of demand coupled with the government policies.

It is essential to announce a relief package for textiles and clothing industry immediately to avoid large number of accounts in the sector becoming NPAs and units getting closed across the country in a matter of months.