Textiles ministry has initiated a dialogue with ICICI to raise up to Rs 500 crore to fund a voluntary retirement scheme (VRS) in 41 National Textiles Corporation (NTC) mills that are to be shut down.
The VRS, based on the department of public enterprises guidelines, is expected to cost about Rs 600 crore. Officials said the estimate of the VRS package would range between Rs 2.5 lakh and Rs 3 lakh and would cover over 20,000 employees.
The proposal for funding the scheme would be taken up at the next group of ministers meeting which is scheduled for next week.
Officials also said the first option before the textiles ministry was to seek budgetary support from the finance ministry, but they were keeping other options including a short term debt from financial institutions.
They said ICICI had given an in-principle clearance to the debt but they are not willing to offer the loan at around 9 per cent interest which NTC is asking for.
"We had also asked for simplifications such as waiving of collateral and providing a government guarantee for the loan, but ICICI is not agreeing with a lower interest rate which we are insisting on," an official said.
While 62 NTC mills have been found unviable, the government proposes to shut down 41 of them and will look at the other 21 later as they are still running.
At the last meeting of the group of ministers held in March this year, the finance ministry had turned down a proposal to provide Rs 2,950 crore budgetary support to the ailing mills and had instead said that the viability of the units should be ascertained and a unit-wise approach in closure should be adopted.
It was also decided that the funds should be raised through sale of surplus assets of these mills.
Apart from funding the VRS, textiles ministry's proposal included an outgo of Rs 950 crore on account of interest waiver, Rs 700 crore for modernisation and Rs 1,500 crore for conversion of loans into equity.
