Tamil Nadu spinning mills body seeks financial support from banks

With the textile industry going through a tough time in view of the prolonged Ukraine war and its resultant economic crisis, the Tamil Nadu Spinning Mills Association (TASMA) has urged the Indian Bank Association (IBA) to extend financial support to the financially-stressed spinning sector.

In a letter to IBA Member-Secretary, TASMA president AP Appukutti sought the extension of an one-year moratorium for repayment of the principal amount availed by spinning mills during the Covid period and conversion of three-year loans under ECLGS into six-year term loans. He also pleaded for the extension of necessary financial assistance to mitigate the stress on working capital, on a case-to-case basis.

Stating that the predominantly cotton-based Indian spinning segment has been facing an unprecedented crisis over the last two years due to several factors, he said the major issue was the recession in various countries. 

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Decline in exports

Further, the non-availability of raw materials at competitive rates [cotton price has been higher by 10-15 per cent due to the levy of 11 per cent import duty on cotton, disruption in man-made fibre raw material supply due to practical issues in implementing quality control orders (QCO)] have resulted in around 50 per cent drop in cotton yarn export, 23 per cent drop in overall exports of cotton textiles and 18 per cent  drop in the total textiles & clothing products during the financial year 2022-23. 

The current price of cotton at ₹58,000 per candy (356 kg), the price of 40s yarn is ₹ 235/kg and clean cotton costs ₹194 per kg. Consequently, mills are unable to meet their obligations to the banks, cotton suppliers, electricity bills and discharge statutory payments, he said. 

With power charges in Tamil Nadu being increased manifold twice since September, the spinning Industry is unable to meet the rising costs when the recession is set to peak and fears things to worsen.

Absence of FTAs

Spinning mills financials have been affected as yarn prices have declined drastically due to slack demand and Indian textile exports have also been hit due to the absence of free trade agreements with major markets such as the EU and the US. As a result, the tariff for Indian textiles is higher compared to Pakistan, Bangladesh and Vietnam, Appukutti said. 

In view of the current situation, small and medium enterprises are unable to service their debts. WIth the repayment cycle of loans extended during Covid commencing, mills have been pushed to a situation where they may have to file for insolvency, the TASMA chief said.  

It is in view of these developments that TASMA has sought financial support from the banks, particularly since the spinning sector is highly capital, labour and power intensive 

“The financial stability of the spinning Segment is, therefore, highly essential to sustain the global competitiveness of the textiles and clothing Industry that provides jobs to over 110 million people especially people below the poverty line and women folks,” Appukutti said.