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Textile sector worried over losing benefits under TUFS with fresh debt restructuring plan

YarnsandFibers News Bureau 2014-04-24 10:00:00 – Mumbai

The Government to tackle impede faced by the textile sector had proposed a debt restructuring package for the textiles industry continues to remain grounded, as textile mills, garment and processing units are worried that any further restructuring would render their bank loans into non- performing assets (NPAs). Moreover, it would disallow them from gaining benefits under the Technology Upgradation Fund Scheme and push up their borrowing costs.

The textile companies to stay buoyant have decided to go for higher interest rate loans as the result the scheme has not been utilized to a large extend. The reason is, a mill seeking second debt restructuring will take at least 2-3 years to get out of the NPA trap and until then, it will not get benefits under the TUFS. Moreover, their future borrowing costs will also rise as their risk potential would increase due to the NPA factor.

Last year, the government has agreed for debt restricting package for the textile industry worth Rs.35,000 crore to address the slowdown in the textiles sector due to the incessant economic slowdown in key export destinations of the US and Europe and continuous relapse in the competitiveness of India as to China, Vietnam and Bangladesh, in addition to this other key liquidity factors were unstable input costs and the timing of the raw material buying, receivables and inventory management affected the textile exports.

The Plan allocation for the Ministry of Textiles under the Technology Upgradation Funds Scheme (TUFS) in the 11th Five-Year Plan was revised from Rs.8,000 crore to Rs.15,404 crore Also the 11th Plan allocation of the Ministry was enhanced from Rs.14,000 crore to Rs.19,000 crore to provide benefits to the textiles sector.

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