Industry And Cluster | News & Insights

TEA demands policy measures to help Tiruppur garment units.

Published: March 18, 2020

The Tiruppur Exporters Association (TEA) has requested the textiles minister to advise banks not to categorise garment clusters, especially micro, small and medium enterprises (MSMEs), in the zone as non-performing assets (NPAs) for non-repayment of loans and provide at least a year’s moratorium to help the units sustain their businesses.

This is because European buyers, particularly from Italy and Spain, have asked TEA member companies not to export garments to them and wait for minimum one or two months till the situation arising out of the COVID-19 pandemic becomes normal and shops reopen.

Some buyers are even cancelling orders and deferring payment against goods despatched. They are also not lifting goods sent, TEA president Raja M Shanmugham wrote in a letter to the minister.

As production has been continuing to fulfill commitments, disruption at this juncture is causing a huge impact on the financial part of the units, he wrote. The units are not in a position to repay bank loans.

TEA apprehends that due to non-clearance of dues, banks may classify the units as NPAs as per BASEL norms.

In addition to this, prices of dyes and chemicals have gone up by about 30 per cent, Shanmugham wrote.

The letter cited examples of developed countries like the United States, Germany, Italy, France, the United Kingdom and Japan, which have taken a slew of financial measures like reduction of bank interest rates and cash reserve, debt moratorium for MSMEs, deferment of loan and tax payment without interest, announcement of new bridge loans and credit guarantees to overcome the disruption in the economic activity caused by the coronavirus outbreak.

A financial stimulus package is also required to reenergize the economy, the letter added.

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