Textile firms seek govt intervention to stop job losses, closure

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SME Times News Bureau | 23 May, 2012
Due to the impact of slowdown in global markets, the textiles industry has sought immediate government intervention to stop job losses and closure of small units, said Apparel Export Promotion Council (AEPC) in release on Wednesday.

"About 7-10 percent people have already lost their jobs in the textile sector, which employs about 4.5 crore people, in the last two years and still it is continuing. If the government will not intervene immediately, more and more people may lose their jobs," AEPC Chairman, A Sakthivel, told media on Wednesday.

He said that domestic banks are not cooperating and this is acting as a double-whammy for the sector, which is already in trouble due to economic crisis in the US and Europe. These two markets account for almost 65 percent of the country's textile exports.

"Banking is one of the biggest problems for the industry.

Banks are giving closure notices. Several small units are facing closures due to credit problem. Banks also create problems in giving credit at affordable rates," he said.

The industry has requested the RBI for restructuring of loans, the chairman said. According to estimates, the sector has a loan burden of about Rs 1 lakh crore.

The sector firstly saw a sudden rise in cotton and cotton yarn prices in October 2010, followed by crash in yarn prices from April 2011 due to poor demand in western markets, leading to a massive credit crisis in the industry.

"The sector is also facing problems of rise in raw material prices and high cost of credit," Sakthivel said.

He demanded export sops, interest subsidy in addition to assured raw material supply to deal with the difficult economic situation.

"To overcome this problem, the government should give 2 percent interest subsidy to the sector in the forthcoming foreign trade policy. Increase in investment will help in stopping job losses," he said.

He also called for a regular policy on cotton exports so that buffer stock can be announced and maintained.

Besides, the chairman suggested other export incentives, ranging from benefits of the Market Linked Focus Product Scheme to the Focus Market Scheme, which can be used to push garment export.