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20 Jun 2024, Edition - 3264, Thursday

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Spinners appeal for remedial measures to overcome impact of demonetisation

Covai Post Network


Southern India Mills’ Association (SIMA)today appealed to the Centre to take remedial measures to overcome the impact of demonetisation on the textile industry, including enhancing the working capital limit by 50 per cent, so that the cash flow can be improved and inventory can be managed.

The spinning sector is already reeling under recession due to the sharp fall in yarn exports and 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) and also the purchase of the regular requirements of stores, spares, accessories in the textile industry.

In a press release, SIMA chairman Senthil Kumar said that a representation was sent to Union Textile Minister Smriti Zubin Irani appealing for remedial measures for mitigating the financial impact of demonetisation and high value currencies on the textile industry.

Stating that textile retail showrooms and shops across the nation were hit by a cash crunch and low sales as the customers were starving for currencies and spending the rationed currency available with them only for emergency purpose, he said that the stocks started piling up across the value chain of the textile industry and the textile units were not in a position to collect any receivables and therefore cash flow of the textile industry is seriously affected.

Moreover, the cotton price 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, he claimed. “It might take at least six months for the textile industry to reach normalcy in its performance,” Senthil Kumar said.

Though the government has announced two months moratorium for the loans up to Rs 1 crore, the textile industry which is already under severe financial crisis needs at least one year moratorium period for repayment of loans and interest to prevent the textile units becoming NPAs, he said.

The performance of the textile units in the post demonetisation period has aggravated and therefore, it is essential to increase the existing NPAs period from 90 days to one year to avoid textile units becoming NPAs, Senthil Kumar said.

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