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Sisspa for cap on new spindleage

R.Y. Narayanan

COIMBATORE, Aug. 15

IN a move to help the textile industry tide over the present crisis caused, among others, by excess spindleage, the South India Small Spinners Association (Sisspa), Coimbatore has urged the Centre and banks not to extend fresh loans to new textile mills.

It also wanted the Government to adopt a pragmatic approach so that non-viable mills in the co-operative, public and private sectors be wound up and the affected parties were provided with compensation.

According to Mr U.G. Kanagarajan, President, Sisspa, one of the reasons for the crisis, which has engulfed the spinning sector, was the excess capacity due to which supply far exceeded demand in both domestic and export sectors.

In a way to get out of glut in the industry, the Union Government and banks should not extend loans to new textile mills as these would only add to the existing spinning capacity.

It was also necessary that the Government should help close down non-viable mills in different sectors and adequate compensation should be provided to workers and managements as had been done in China and Sri Lanka which would help the viable mills to ri de out the crisis.

The small spinning mills were also not able to access the Textile Upgradation Fund (TUF) in view of the stiff norms set. Banks were willing to lend only to such mills which had more than 12,000 spindles. He wanted this rule to be relaxed so that small sp inners may benefit.

Mr Kanagarajan said banks were fighting shy of extending working capital funds to small spinning mills, despite the fact that traditional industries like textiles had contributed to their growth.

Banks seemed to have been asked to take tough action against units which had not paid interest in time. He said this default was not intentional and only the adverse conditions facing the industry had caused this.

The Sisspa President suggested that the existing working capital limits may be converted into term loans repayable after five years and an equal amount may be advanced as working capital at lower interest.

He also sought fiscal reliefs such as restoration of excise exemption limit of Rs 1 crore for the small spinning mills, withdrawal of 5.5 per cent customs duty on imported raw cotton and reduction in sales tax on cone yarn to two per cent and exemption o f hank yarn from ST.

Mr Kanagarajan also pointed out that while the Centre levied 9.2 per cent excise duty on cotton yarn, it had not made any provision for making it `modvatable' at the downstream stages.

Instead, it had provided deemed modvat and duty drawback facilities to downstream sectors, losing revenue in the process.

He suggested that the Government at one stroke withdraw the excise duty on cotton yarn and the deemed modvat credit provided to the downstream sectors of the textile industry which would make the measure `revenue-neutral'.

He also appealed to the trade union leaders to adopt a realistic approach and put off their demands such as wage revision as the industry was facing a crisis.