Cotton, Textile Traders Seek Cover For Creditors

The cotton and textile sectors in the country are facing a severe financial crisis. The payment system in these sectors has almost broken down. Recent advertisements by leading organisations of the trade like ICMF, SIMA in newspapers are an open declaration of the crisis.

In the last three decades, cotton suppliers have lost huge amounts as there is no special protection in the law for unsecured creditors. Mills procured moratorium under the Sick Industries Special Provisions Act 1985, but once the moratorium was granted, authorities did not provide any scheme as to when the frozen dues of suppliers would be paid. This has left creditors high and dry.

 

This is the right time to amend the Act to give adequate protection to the suppliers before the grant of moratorium, traders feel.

Moreover, cotton suppliers lost crores of rupees when 13 fully-operational textile mills in Mumbai were suddenly taken over by the government vide Ordinance No 10 in October 1983.

Kishor Shah, president of Ahmedabad Cotton Merchants Association, said remedy can be found only with the co-operation of all segments connected with textile mills and the cotton trade. In the earlier days, textile magnates like Kasturbhai Lalbhai and Krishnaraj Thackersey were the frontrunners in helping solve the problems of the cotton trade.

Shah said that cotton being a cash crop, payments are to be made in cash with the agriculture produce markets for the purchases of kapas. Its processing needs time and the amount involved in it is also quite large.

For example, 100 bales of full pressed cotton (FPC) is valued in the range of Rs 11-14 lakh. Also, kapas arrivals are very fast, within a period of 100 to 120 days.

It is in the interest of mill consumers to ensure that the payments to cotton suppliers is made in time. It is a fact that cotton production has gone up substantially after 1951 and this has helped the growth of the textile industry.

Farmers, however, prefer to grow cotton, even if prices of other crops are higher. If cotton ceases to be a cash crop, the acreage under cotton cultivation will go down which will not be in the interest of cotton consumers and if the crop is reduced, export earnings of the commodity will also be affected.