New Delhi, 5 January 2024 – In a joint appeal to the Hon’ble Union Minister of Finance Smt. Nirmala Sitharaman, the textile mill associations of India have highlighted the acute financial stress faced by the spinning segment of the textile industry. The appeal comes after a significant downturn in the cotton-based spinning sector, exacerbated by external factors such as the prolonged Ukraine-Russia conflict and the recent Israel-Hamas war.
The textile industry, a vital contributor to India’s economy, had received critical support under the Emergency Credit Line Guarantee Scheme (ECLGS) to the tune of Rs.16,920 crores, constituting approximately 6% of the total disbursement of Rs.2.82 lakh crores as of September 30, 2022. However, the spinning segment now faces a severe crisis with a 50% decline in cotton yarn exports, a 23% drop in overall exports of cotton textiles, and an 18% reduction in total textiles and clothing products during the financial year 2022-23 compared to the previous year.
The prolonged economic impact of global conflicts, coupled with challenges such as an 11% import duty on cotton and issues related to MMF Quality Control Orders, has led to a significant drop in capacity utilization, ranging from 50% to 70%, for almost a year. This dire situation has pushed many spinning mills, particularly SMEs, into severe financial stress, rendering them unable to service debts and meet standing charges. As a result, many units have become SMA-1, SMA-2, and NPA accounts.
In light of these challenges, the textile mill associations earnestly appeal to the Hon’ble Minister to advise the banking sector to consider the spinning segment as a special case and extend the following financial support measures:
1. Extend the one-year moratorium for repayment of the principal amount
2. Convert three-year loans under ECLGS into six-year term loans
3. Extend necessary financial assistance to mitigate the stress on working capital, on a case-to-case basis
“We fervently appeal to your good self to consider our above pleas favorably to mitigate the unforeseen crisis plaguing the spinning sector, prevent job losses to several lakh people, sustain the market share, and achieve the envisaged export targets,” stated Rakesh Mehra, Chairman of the Confederation of Indian Textile Industry.
The joint appeal underscores the urgency of addressing the financial challenges faced by the spinning segment to ensure the continued growth and stability of the textile industry, a key pillar of India’s economic strength.
