KARNATAKA MYSURU 13/08/2021: Plans to promote Chamajanagar as a knitwear hub is gaining traction. Photo: SRIRAM MA | Photo Credit: SRIRAM MA
Gave a representation to FM Nirmala Sitharaman in Chennai
The Tiruppur Exporters’ Association, whose members are into knitwear manufacturing, has requested Finance Minister Nirmala Sitharaman to immediately provide fresh infusion of liquidity to the struggling micro, small and medium enterprises. This will help the units in the ‘Dollar Town’ — as Tiruppur in western Tamil Nadu is known — get back to normal functioning, says a representation made by the association’s president, Raja M Shanmugham, to the minister here recently.
Tiruppur knitwear exports clocked Rs. 26,030 crore during April-January in the current fiscal and are expected to cross Rs. 32,000 crore by the end of the fiscal year. The association represents around 1,150 exporting units employing over six lakh workers, with 65 per cent of them women. Out of six lakh workers, two lakh are from Odisha, Bihar, Jharkhand and Bengal, and from the North-East.
Covid impact
Due to factors like impact of Covid pandemic and increasing prices of cotton yarn, MSMEs are struggling to repay loans. The non-performing asset norms have to be relaxed to six months from three months to help the units sustain and rebuild their business, the association said.
“We request the Finance Minister to announce a new scheme like Emergency Credit Line Guarantee Scheme (ECLGS) and MSMEs be permitted to avail additional credit facility of 10-20 per cent of the existing limit. This is the need of the hour to bail them out of the crisis. MSMEs in progressive and performing industries, employment-oriented like the garment sector, could be considered under this scheme,” the association said.
Rising raw material cost
In the last 15 months, there has been an unprecedented increase in the cost of raw material. This, coupled with hike in accessory prices and job working charges, has impacted MSMEs mainly on the liquidity front. The units have been operating from hand to mouth. The continuous steep hike of the inputs has drained their liquidity, even after getting credit support through ECLGS.
For example, the exporting units, which were purchasing cotton yarn at Rs. 300 per kg 15 months back, can now purchase only half a kg of cotton yarn for the same amount.
As a result, MSMEs are now undergoing a severe liquidity crisis.
Another cause for concern is that, as per the commitment made to foreign buyers well in advance, MSMEs must compulsorily execute the orders, despite incurring losses or getting a wafer-thin margin. Nearly 95 per cent of the units in the garment export sector are MSMEs, the association said.
In the Union Budget, a condition has been imposed that requires knitwear exporting units to visit a Customs Preventive Unit located in Coimbatore for import of items on each occasion.
This causes practical difficulties and is also time-consuming, besides entailing undue delay and additional expenses.
This problem has emerged at a time when the government is advocating ease of doing business.
The association urged the minister to remove the condition and restore the old system of submitting the running bond to Customs and their deducting the duty foregone amount from the Bond, which will be also system-oriented and there would not be any hassle to the exporting units.
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