Contact us on +022 2419 3000 or indiantextilejournal.com.

Mills seek relief to offset impact of demonetisation

Nov 25, 2016
Mills seek relief to offset impact of demonetisation

On the one side appreciating the bold initiative of demonetisation of the Government, The Southern India Mills’ Association (SIMA) has also lamented the hardships faced by the mills. "The withdrawal of around 86 per cent of the currency in circulation and issuance of less than 10 per cent of currency in the denomination of Rs 2,000 has led to severe shortage of funds for regular operations, purchase of raw material (cotton), sale of finished goods (yarn, fabric etc.,) and also the purchase of the regular requirements of stores, spares, accessories in the textile industry," says M Senthil Kumar, Chairman, SIMA.

Seeking immediately in an appeal for remedial steps to the Union Textile Minister, Smriti Irani, Senthil Kumar has stated that the textile retail showrooms and shops across the nation are hit by cash crunch and low sales as the customers are starving for currencies and pending the rationed currency available with them only for emergency purpose. The stocks have started piling up across the value chain of the textile industry and the textile units are not in a position to collect any receivables and therefore cash flow of the textile industry is seriously affected. Besides, the cotton price has increased by around Rs 2,000 per candy as the cotton arrival to the market came to a grinding halt during the first 10 days after demonetisation and has currently improved to the level of 50 to 60 per cent.

Senthil Kumar has stated that it might take at least six months for the textile industry to reach normalcy in its performance. SIMA chief has stated that the Association has sought for the following remedial measures to enable the industry to mitigate the challenges posed by the cash crunch created by demonetisation:
  • Extend 2 per cent MEIS and 3 per cent IES benefits for cotton yarn exports and enable the industry to boost cotton yarn exports and improve its global competitiveness.
  • Enhance the working capital limit by 50 per cent.
  • Extend the two-month moratorium for the loans up to Rs 1 crore to at least one year moratorium period.
  • Increase the existing NPAs period from 90 days to one year to avoid textile units becoming NPAs.
  • Defer all the tax payments for a period of six months.
  • Offer one year moratorium period to the cotton farmers for the repayment of loans and interest with clear instructions to the banks not to adjust the sale proceeds of kapas against their dues. CCI could also procure kapas at market price to help the farmers
  • Reduce interest rate by 3 per cent for all the term loans and working capital loan across the value chain.
  • Relax norms for migrant workers to open bank accounts instantly by showing any ID proof, which would enable the employer to pay the wages through bank.
Senthil Kumar feels that it might take at least six months for the textile industry to reach normalcy. SIMA has sought for the following remedial measures to enable the industry to mitigate the challenges posed by the cash crunch.