PACKAGE FOR THE TEXTILES INDUSTRY
The Government has
announced a comprehensive package for the textile industry principally
addressing the problems of two major sectors – the powerloom and
the integrated textile units. The third, the handloom sector,
has already been fully addressed earlier.
POWERLOOM SECTOR
The Decentralised
Powerloom Sector is the backbone of the textile value addition
chain. It accounts for 60 per cent of the fabric production of
the country. The global competitiveness of the country’s textiles
industry is critically dependent upon the speed and efficiency
with which the powerloom sector modernises, so as to achieve international
standards of quality and productivity.
To support this sector,
while announcing changes in the fiscal duty structure for the
textile industry in the Union Budget 2003-04, Finance Minister
had promised a package of schemes for the benefit of the decentralised
powerloom sector.
This package includes
:
- a new powerloom workshed along
with improvement of other infrastructure of existing powerloom
clusters;
- powerloom workers to be covered
under special insurance scheme to provide them insurance cover
against death, accident and disability;
- enlargement of Technology Upgradation
Fund Scheme (TUFS) to cover modernisation of powerlooms.
In pursuance of the
provisions of this package, to create a better working environment
and to obtain higher productivity, Ministry of Textiles then introduced
the Group Wrokshed Scheme for Powerloom Weavers. Under the scheme,
25 per cent of the cost of construction of Group Worksheds to
house modern looms would be borne by the Government. Group Worksheds
Scheme can be taken together with the Textile Infrastructure Development
Scheme, under which critical infrastructure requirements can be
created with financial assistance up to Rs 20 crore per project.
Further, as a welfare
measure, a new Group Insurance Scheme for Powerloom Workers has
been started. Insurance Cover up to Rs 80,000/- for accidental
death and Rs 50,000/- for natural death or disability will be
provided. Only 35 per cent of the yearly premium would need to
be borne by the weaver; the rest would be paid by LIC and the
Central Government.
To induct technology
in the decentralised powerloom sector, the Technology Upgradation
Fund Scheme has been enlarged for powerloom units wanting to take
loans up to Rs 50 lakh, for modern machinery by :
- increase in direct subsidy from
12 per cent to 20 per cent;
- increase in sources of credit
by inclusion of genuine NBFCs.
With this, the government
has committed Rs 260 crore to the decentralised powerloom industry.
INTEGRATED TEXTILE
UNITS
Integrated Textile
units currently face high cost of servicing capital loans, having
availed of them before introduction of the Technology Upgradation
Fund Scheme in 1999. The total exposure of financial institutions
to the textile sector, in the form of term loans, is estimated
at Rs 10,000 crore, of which one-third is not likely to be revived,
and thus not qualifying for assistance. The balance needing to
be addressed is thus around Rs 6,000 crore.
The Government have,
therefore, finalised a scheme in consultation with the stakeholders
and the RBI, the principal objective of which is to permit banks
to lend to the textile sector at eight-nine per cent rate of interest.
Its salient features
are :
- Parameters determining the
eligibility of units
- Technical viability will be
assessed by the designated technical agencies.
- Units should have positive Earning
Before Interest, Depreciation, Tax and Amortisation (EBIDTA)
in three out of last five years.
- The post-restructuring debt
service coverage ratio should be atleast 1 : 1.33.
- Nature of Relief
- Banks/FIs will be permitted
to access external commercial borrowings and convert rupee
term loans into foreign currency loans.
- ECB borrowings by banks/FIs
will be permitted for five years.
- The scheme would have a tenure
of five years.
- Accumulated liquidated damages
and penal interest will be waived.
- Accumulated interest liability
will be frozen and converted into zero coupon bonds, payable
after five years, in instalments, or at one time, as negotiated
between the lender and the borrower.
- General guidelines for the
scheme
- In case of adverse debt equity
ratio, the promoters will be willing to write down equity.
- A personal guarantee by the
promoters as in steel will be a pre-condition for its restructuring.
- RBI will consider classifying
such restructured accounts as standard assets.
- Wilful defaulters will not be
eligible for the scheme.
- Healthy textile units that are
paying dividends and are able to service their loans will
be provided assistance under the Technology Upgradation Fund
Scheme to become even more competitive.
These schemes for
the powerloom and Integrated Textile Units will come into effect
from September 15, 2003. The Ministry of Finance shall be the
nodal Ministry for monitoring these schemes and for their efficient
and early implementation.
