The Southern India Mills’ Association (SIMA) has sought certain remedial measures to enable the industry to mitigate the challenges posed by the cash crunch created by demonetisation. SIMA has suggested enhancing the working capital limit by 50 per cent and increasing the existing NPAs period from 90 days to one year among a number of other things.
In a representation sent to the Union textiles Minister Smriti Irani, M Senthil Kumar, Chairman of SIMA, has stated that 2 per cent MEIS and 3 per cent IES benefits can be extended for cotton yarn exports to enable the industry to boost exports and improve its global competitiveness. The government can increase the moratorium period for repayment of loans up to Rs 1 crore from 2 months to 1 year, considering that the textile industry is under a severe financial crisis and there’s a need to prevent textile units from becoming non-performing assets (NPAs).
The representation also states that the government may consider deferring all the tax payments for a period of six months. One year moratorium period could also be given to the cotton farmers for the repayment of loans and interest, with clear instructions to the banks not to adjust the sale proceeds of kapas against their dues. Competition Commission of India (CCI) could also procure kapas at market price to help the farmers.
SIMA has also made a suggestion to reduce interest rate of 12 to 13 per cent by 3 per cent for all the term loans and working capital loan across the value chain to help textile units to sustain their financial viability. Necessary directions can also be given to the banks to enable migrant workers to instantly open accounts by showing any ID proof. This would enable the employer to pay the wages through the bank.
These remedial measures have been suggested by Kumar as the textile retail showrooms and shops across the nation are hit by cash crunch and low sales as the customers are starving for currencies and spending the rationed currency available with them only for emergency purpose. He has stated that the stocks started piling up across the value chain of the textile industry and the textile units are not in a position to collect any receivables and therefore cash flow of the textile industry is seriously affected.
SIMA chairman has further stated that the cotton price increased by around Rs 2,000 per candy as the cotton arrival to the market came to a grinding halt during the first 10 days after demonetisation and has currently improved to the level of 50 to 60 per cent. It might take at least six months for the textile industry to reach normalcy in its performance.
The withdrawal of around 86 per cent of the currency in circulation has led to severe shortage of funds for regular operations, purchase of raw material, sale of finished goods and the purchase of regular requirements of stores, spares, accessories in the textile industry. (KD)
Source: fibre2fashion
