Surat textile industry reels under reduced credit limit

With the festive season of Diwali round the corner, Surat-based textile traders are facing the cash crunch again. Traders are facing a tough time dealing with a reduced credit limit of mere 30 days as against over 120 days couple of months ago.

"Couple of months the industry had enough cash flow given which we had a credit limit of over 120 days. However, just when the festive season is nearing, the credit limit is now reduced to less than 30 days. In fact, in some cases, textile traders have ended up paying cash since the industry doesn't want to take any chances," said Devkishan Manghani, general secretary of Federation of Surat Textile Traders Association (FOSTTA).

According to Manghani, the cash crunch is due to the sudden rise in demand for fabric in the Surat textile industry. "The onset of festive season has led to an increase in demand given which industry players do not want to take risk and so end up demanding either cash or offer a reduced credit limit," he added.

However, the crunch is also being experienced by exporters. "The whole credit cycle has changed in the recent times in the Surat-based textile industry. The crunch is not only in domestic market but also in export market. Even the textile exporters here are facing a tough time. Moreover, due to lack of cash, traders have not been able to convert stock into sales," said Abhijit Agarwal, director of Shyam Sizers Pvt. Ltd.

"Currently, the industry, which is predominantly into synthetic goods, is growing at around 8-10 per cent. The TUFS subsidy will definitely boost the industry and result in more number of units being set up. Last year when almost half of the 450-odd processing units were on the verge of closure, however, the scenario is changing gradually," said Manghani.

The industry's turnover from synthetic ready goods amounts to over Rs 30,000 crore per annum from 30 million metres per day.