Having dealt a body blow to the textiles industry over the past few decades by way of concessions to small-scale units like powerlooms, the government is now trying its best to repair the damage before trade quotas are abolished on January 1, 2005.
While a Technology Upgradation Fund Scheme was set up in 1999-00 to provide subsidised funds to the industry, another fund for restructuring its debt is on the cards.
Part of the funds required for this will come from the government.
As for the bias against larger units, the Budget for 2003-04 did a lot to rectify this.
According to estimates by the Steering Group on Investment and Growth in Textiles, headed by Planning Commission Member N K Singh, the industry needs fresh investments of around Rs 98,000 crore in order to become competitive.
The group has recommended various options and a decision is expected soon, but broadly, it has recommended that existing loans be restructured in a way that interest rates are around 13-14 per cent, against 17-18 per cent now.
Financial institutions, which have around Rs 20,000 crore exposure to the textiles industry, will have to bear the burden of any interest rate reduction.
The Textile Industry Reconstruction Fund will provide a subsidy of around 4-5 percentage points worth of interest payments, effectively lowering interest rates to 8-9 per cent for borrowers that qualify for restructuring.
According to Chintan Parikh, chairman of the Indian Cotton Mills Federation, which hired Deloitte Haskins & Sells to prepare a restructuring plan, the government needs to spend just around Rs 400-500 crore a year to facilitate restructuring of around Rs 10,000 crore worth of assets.
