Stressed assets in textiles sector ease, but need more support

Stressed assets worth thousands of crores in textiles sector posing a threat to the banking system have eased over past few months due to favourable policy suport from the government, industry experts said.
 

At a deliberation on the 'Investment opportunities in Maharashtra in textiles sector' in Make in India summit here on Sunday, Dilip Jiwrajka, Managing Director of Alok Industries, said, "Stressed assets were created due to high interest rates. In early nineties, lots of investments were made in textiles sector (perhaps to take advantage of the Technology Upgradation Funds Scheme or TUFS money was raised to creat nee capacity). Investors availed funds at 3.5% of interest rate which has now risen to 10.5%."

But now, with revised TUFS in place and lots if incentives and capital subsidy announced by the government, the stressed assets have eased, he added.

For the first time ever, government of Maharashtra has introduced a scheme under which upto 30% of capital subsidy is granted for self financing. Capital subsidy was allowed only for those projects that were financed by banks.

"Allowing capital subsidy only on banks' financed projects mean we are encouraging mills to take loan from banks. For the first time we are encouraging investors with self financing. The government might resolve the streased assets issue temporarily. But for long term, we need to encourage promoter's equity in the company," said Sunil Porwal, Additional Chief Secretary (Textiles), Government of Maharashtra.

Stressed assets problem in other sector could be because of global factors (economic slowdown), but textiles sector faces its own inherent problems. Elevated labour and raw material costs coupled with a slowdown in demand has been a major issue helping lower profit margins for textiles players.

Emphasising the need for value addition, the chief minister of Maharashtra Devendra Fadnavis assured the industry with more policy support. The government of Maharashtra haa already announced 16 textiles parks and one mega textiles cluster in major cotton growing regions.

Fadnavis also throws idea of setting up an apparel park in the state.

"Global economic slowdown has given us an opportunity to increase our market share in the world market at 5% as compared to over 30% of China. We need to do everything in five years. We are confident that we can achieve that with all your supports", Fadnavis said. Subhash Desai, Minister of Industries, Government of Maharashtra, wooed investors too.