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Jul 19, 2009

Industries in south districts owe Rs 50k cr to banks


Companies that are operating in the two major industrial towns of Coimbatore and Tirupur in south Tamil Nadu owe a whopping Rs 50,000 crore to various banks and financial institutions. While admitting that the loan outstanding is huge, various industry associations and representatives said it was not only the financial turmoil, but power cuts and inadequate incentives from the government that had hit the bottom of the pyramid.

The Southern India Engineering Manufacturers’ Association (SIEMA) in Coimbatore, considered to be the largest base for the engineering industry, has estimated that the engineering industry alone has to pay bank loans worth Rs 20,000 crore. Similarly, the textile industry in Coimbatore owes around Rs 15,000 crore and the garment industry in Tirupur Rs 6,000 crore. Major public sector and private sector banks and financial institutions have confirmed that the industry owes as much as over Rs 40,000 crore.

The debtors in the engineering industry include foundries, auto component, pump set, textile machinery and industrial valve makers, who together employ 40 per cent of the industrial working population in this district. It has reported a 50 per cent drop in production and capacity utilisation. Already over 100,000 people had lost their jobs in Coimbatore district, said SIEMA president Jayakumar Ramdass.

“We could not keep up our delivery promise to the customers, which has resulted in the industry losing job orders to Ludhiana and Gujarat. Despite these problems, we were getting inquiries. However, we could not deliver goods on time and offer competitive prices,” he added.

The Tirupur garment industry, which is the country’s largest knitwear export hub, has also confirmed that the position is very bad all over. The industry has to repay as much as Rs 6,000 crore to banks and other financial institutions.“Customers are still willing to place orders on us, if we can match the Chinese and Bangladesh prices,” said A Sakthivel, president, Tirupur Exports Association (TEA). Chinese and Bangladeshis are quoting 20 per cent and 30 per cent less as compared to the Tirupur exporters. Extra power, raw material and interest costs are making Tirupur garments costlier and uncompetitive, he added.

In this backdrop, the industry needs support from the banks. A letter was already sent to the finance ministry seeking moratorium for two years for repayment of the term loans and interest rates for the garment units in Tirupur, Sakthivel said. Similar demand was also made by the industries in Coimbatore.

According to TEA’s data, exports from Tirupur dipped around Rs 9,500 crore in 2008-09 from Rs 11,000 crore in 2006-07, a first-time decline (14 per cent) witnessed by Tirupur exporters.
Micro units in engineering in Coimbatore district have to repay loan to the tune of Rs 7,000 crore (of the Rs 20,000 crore), added J James, president of the Tamil Nadu Association of Cottage and Micro Enterprise (TACT).

“Already, over 1,000 micro units were closed and 50,000 people had lost their jobs since their owners were not in a position to repay loans. A major portion of these loans was borrowed from private banks. It is estimated that there are over 35,000 micro units in this district, which largely depend on job orders from other majors,” he said.The association has estimated that the textile industry, including spinning, cotton, yarn and other mills, has to repay loans worth Rs 15,000 crore.

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