Cotton mills push for action on debt relief

The Indian Cotton Mills' Federation (ICMF) is pushing for a debt restructuring package (DRP) for textile mills, as the external commercial borrowings (ECB) route has not found any takers among lenders.

BK Krishnaraj Vanavarayar, chairman, ICMF, said reconstruction schemes announced by the government in September 2003 missed out on a textile reconstruction fund (TRF).

He said, "Our fears have come true- lenders have not taken up a single case so far." Interactions with lenders revealed that they were not clear about details of the scheme.

ICMF has approached the central finance minister for a sectoral DRP as recommended by the N K Singh committee. ICMF has asked textile minister S Shahnawaz Hussain to take up the issue with the finance ministry.

The Singh report had asked lenders to bring down applicable interest rate on eligible loans to 12 per cent and creation of TRF by the government to take on four per cent of the interest burden of the mills.

This would bring down the net interest cost to eight per cent. It also laid down benchmarks to identify eligible units and parameters for implementing the scheme.

ICMF's consulting agency, Deloitte Haskins & Sells, had worked on TRF and made similar suggestions.

ICMF felt ECBs failed as the textile sector had units with varying loan structures not large enough for restructuring through ECBs.

Many lenders were not eligible to issue ECBs and so could not reduce interest cost to 8-9 per cent.