Rising interest rates are virtually crippling Indian Garment and Knitwear Export Sector. Already hit by dampening exports to the US & UK markets, the sector has received a further jolt with rising interest rates making the borrowing costlier.
Resulting only in loosing competitiveness in global markets and left with struggling to meet financial needs for running the units, many apparel making units are soon set to be categorized as NPA (Non-performing Assets) by banks owing to their inability to repay loans.
Dr A Sakthivel, Chairman, Apparel Export Promotion Council (AEPC), has written a letter to the Hon’ble Union Minister of Finance, Shri Pranab Mukherjee citing out this concern. Emphasizing the fact that the sector has been losing its competitiveness in the global market owing to rising interest costs, he has appealed the Hon’ble Finance Minister to take a corrective action to save the apparel sector and restore the competitiveness of the industry. He has sought for restructuring of finance and extension of two per cent interest subvention on Export Credit to Garment and Knitwear Sector.
He has further urged the Hon’ble Finance Minister to extend these measures to the entire textile value chain from job worker to upstream large scale sector. AEPC feels that the proposal has no revenue implications, since the interest would continue to be paid on all loans.
Dr Sakthivel has requested for the Ministry’s support with the following measures:
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A moratorium on the repayment of principal amounts against long term loans for 24 months, without asset reclassification or additional provisioning, including for repeated rescheduling and rescheduling of loans under CDR.
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Working capital eroded due to steep decline in prices of raw materials and finished goods may be converted into Working Capital Term Loans (WCTL) for a period of five years with a moratorium of one year.
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Include the garment and knitwear exporting sectors across the board under the coverage of 2% interest subvention on Rupee export credit scheme w.e.f. 01.04.2011.
According to AEPC, these initiatives would help the sector and save those dyeing units, which are badly affected by cancellation of export orders. To note, the apparel hub of Tirupur has seen the closure of many dyeing units owing to turbulent export market conditions and eroding export orders.