SMEs in textile sector demands reduction in interest rates

Request PM to make funds available for the SME textile sector at 7% a year

Perturbed by the high cost of production, the small and medium enterprises (SMEs) in the textile sector in Punjab are demanding a reduction in interest rates offered by banks and financial institutions. In a letter to Prime Minister, Manmohan Singh the SMEs requested to make funds available for the SME textile sector at seven per cent a year interest on the lines of agriculture sector, enabling them to compete with overseas manufacturers who get funds much cheaper.

Further, this will help SME textile sector to grow in domestic and international markets.

Speaking to Business Standard, Shawl Club(India) Amritsar, General Secretary, Piara Lal Seth said," We have written a letter to the Prime Minister and has requested him to make funds available to this sector at cheaper rate. Currently, the Textile Industry in SME sector is presently facing much hardship to compete in global markets as well as domestic markets. The main reason is the high rate of interest at 14 per cent per annum being charged by banks and financial institutions which is highest in the world. The exports of textile are also falling year by year due to basic high cost of production. Further more it may be noted that when RBI held its first meeting in Amritsar on November 14, 2009 and the issue of interest rate for SME Textile sector at par with agriculture sector was taken up by Confederation of Indian Industry and Shawl Club (India),Amritsar. Though it was principally agreed by Ministry of Finance,New Delhi but was made applicable to Handloom sector only.'

"Compared to India, the rate of interest in China is maximum four per cent a year. Our neighbouring countries, Bangladesh, Pakistan who are also coming very fast in manufacturing of textiles and offer funds at very normal charges by way of interest," he added.

He added, " It is pertinent to submit that State of Gujarat in their Industrial Policy for 2012 announced a interest subsidy of 7 per cent to Textile Sector over and above TUF scheme to bring the interest rate at par with agriculture sector. In light of the above facts we suggest that Central Government should take the initiative to compensate the states on the pattern of Jawahar Lal Nehru Urban Development Scheme in respect of levy of property tax and other many schemes. The states who make policy of interest subsidy for SME textile sector to bring interest rate at par with agriculture sector by compensated under central schemes mentioned above. By taking these steps we are confident that SME sector in textile will definitely compete with Global markets and also provide more employment avenues in the future.'

It is worth noting that The MSME sector contributes around 9 percent of GDP and accounts for around 45 per cent of the manufacturing output and around 36 per cent of total value of the export.

It is worth to note that textile sector is the second largest employment provider segment next to agriculture sector needs interest at par with agriculture.