The Southern India Mills’ Association (SIMA) has appealed the Government regarding the effects of demonetization that have led to the shortage of funds for regular operations including purchase of raw material (cotton), purchase of the regular requirements of stores, spares, accessories and sale of finished goods (yarn, fabric, etc.,) in the textile industry.
Senthil Kumar, Chairman of SIMA said, “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. 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 demonetization and has currently improved to the level of 50 to 60 per cent. It might take at least six months for the textile industry to reach normalcy in its performance.”
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The association suggested various remedial measures to subside the demonetization impact – Government should extend 2 per cent MEIS and 3 per cent IES benefits for cotton yarn exports and improve its global competitiveness; the working capital limit should be enhanced 50 per cent to improve the cash flow and manage the inventory; at least one year moratorium period for repayment of loans and interest to prevent the textile units becoming NPAs; increase the existing NPAs period from 90 days to one year to avoid textile units becoming NPAs; one year moratorium period should also be given to the cotton farmers for the repayment of loans and interest with clear instructions to the banks not to adjust the sale proceeds of kapas against their dues; and necessary direction may be given to the banks to enable the workers to open the accounts instantly by showing any ID proof.
