The textile industry took a huge sigh of relief after receiving theclearance of Finance Minister pertaining to debt restructuring proposals for the textiles and clothing industry.
In a meeting with the Finance Minister, Textile Minister Anand Sharma obtained clearance for restructuring of debt worth Rs. 35,000 crores for the industry which incurred losses worth Rs 11,000 crores in 2011-12 due to unstable fibre, yarn prices and lower demand in the market. The settlement that has been brought between Finance Minister Pranab Mukherjee and Commerce Industry and Textiles Minister Anand Sharma after their meeting that includes a two-year interest moratorium and conversion of eroded working capital into longer-term loans with three to five year term.
Textile Industry groups seem to be very happy with the government’s move and believe it to have enabled them to meet their export targets set for the year. A Sakthivel, chairman, Apparel Export Promotion Council said, “This was much needed and will help the industry to continue giving employment to over 11 million workers and also to meet export targets of $17 billion set for the year 2012-13.”
As per statistics, the outlined restructure of loans will only cover a quarter of the total loans since banks have an exposure of Rs 1.56 lakh crores to the sector. The move will be benefiting around 2,000 cotton textile mills mostly based in Tamil Nadu and the man-made fibre segment in Gujarat. Almost Rs 27,000 is supposed to be allotted to cotton mills, while Rs 3,600 will go to the man-made segment.
A special involvement from the RBI is sought by the government to avoid lenders classifying this debt as non-performing asset and set aside more funds as provisioning for bad and doubtful debt.