Rs 17k cr debt restructuring for TN textile industry

The Union finance ministry’s decision to restructure debt worth about Rs 35,000 crore to the textile industry has offered a relief to the textile industry in Tamil Nadu, the largest in India.

The industry in the state, likely to see the restructuring of debt worth Rs 17,000 crore, is struggling owing to the crisis in Europe and the rupee fluctuation.

S Dinakaran, chairman, the Southern India Mills’ Association, said that the news of debt restructuring had brought great relief to the ailing textile industry. This would also help textile mills in Andhra Pradesh, which had incurred huge losses last year.

“Since the textile units have already started making marginal profits,the industry will revive soon and perform well. The industry will be in a position to pay the interest and improve its liquidity position with the announcement of the package,” he said.

According to the association estimate, in Tamil Nadu alone the debt restructuring of the mills would be around Rs 15,000 crore and the number of units likely to be benefited would be around 600-700, most of them being small and medium enterprises (SMEs).

A Sakthivel, president of the Tirupur Exporters Association (TEA), which represents the Rs 12,500-crore knitwear industry, which is the country's largest, said that around Rs 1,200-crore debt will be restructured in Tirupur and around 200 SMEs will be benefited from this move.

He added that the finance ministry would recommend to the RBI not to classify the units' assets as NPAs after providing special dispensations in the NPA rules and also allowing a two-year moratorium on the term loan to the textile industry and converting the eroded working capital into a working capital term loan repayable over a period of three to five years.

He added that the knitwear garment export sector and other stakeholder units in Tirupur have been eagerly awaiting with bated breath for the positive announcement, mainly to tide over the crisis since they are struggling to service their loan and interests further to the slowdown of exports. He further noted that the debt restructuring to the units at this juncture will be a major relief to all and certainly lift the sagging morale of the textile industry.

Commenting on the textile industry in Tirupur, Sakthivel said, “As the currency is depreciating, customers are asking for rate cuts, which we have done to the tune of 3-4 per cent. If we don’t do, the customers will go to other countries.”

The industry is still struggling, said another exporter from the textile town, due to the European crisis and the increase in power and capital costs. “No new orders are coming from our traditional markets of Europe and the US. Whatever the orders which are coming are not viable.”

The industry is now looking at new markets like Japan, Israel, Russia, South America and South Africa.

“With the entry of new markets and going by the current rupee value against the dollar, we are hoping to close the current fiscal with a total turnover of around Rs 14,000 crore, as compared to Rs 12500-12800 crore last year,” said Sakthievel.