Industrial units in the southern districts of Tamil Nadu are groaning under the burden of loans to the tune of Rs 50,000 crore.
Companies operating in the two major industrial towns of Coimbatore and Tirupur in south Tamil Nadu owe a whopping Rs 50,000 crore in loans to various banks and financial institutions. While admitting that the loan outstanding is huge, various industry associations and representatives stated that it is not only the financial turmoil, but also the power cut and inadequate incentives from the government that have hit the sector.
Southern India Engineering Manufacturers’ Association in Coimbatore, which is considered the largest base for engineering sector, has estimated that engineering industry alone has to repay 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. The major public sector and private sector banks and financial institutions have confirmed that the industry owes over Rs 40,000 crore.
The major debtors in the engineering industry include foundries, auto-component, pump-set, textile-machinery and industrial-valve makers who all employ 40 per cent of the industrial working population in this district. It has reported 50 per cent drop in production and capacity utilisation. Already over 100,000 people have lost their jobs in Coimbatore district, said Jayakumar Ramdass, president, SIEMA.
While acknowledging the industry outstanding is huge, it was not recession alone which hit the industry but also shortage of power. “We could not keep our delivery promise, which has resulted in the industry losing job orders to Ludhiana and Gujarat.” Despite these problems we were getting inquiries, but we could not deliver goods on time and offer a competitive price, he added.
The Tirupur garment industry, which is the country’s largest knitwear export hub, has also confirmed the position was very bad all over. This industry has to repay as much as Rs 6,000 crore to banks and other financial institutions.
“Yet, customers are willing to place orders only if we can match the prices of the Chinese and Bangladeshi firms,” said A Sakthivel, president, Tirupur Exports Association.
He noted, Chinese are quoting 20 per cent less and Bangladesh 30 per cent less compared to Tirupur exporters. Extra power, raw material and interest costs are making Tirupur garments costlier and uncompetitive.
Against 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 term loans and interest rates for the garment units in Tirupur, said Sakthivel. Similar demand was also made by Coimbatore industries.
According to TEA’s data, exports from Tirupur dropped to around Rs 9,500 crore in 2008-09 from Rs 11,000 crore in 2006-07, a drop of around 13 per cent, the first time that Tirupur exporters have witnessed a drop in the exports.
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, Tamil Nadu Association of Cottage and Micro Enterprise (TACT).
He added, already around over 1,000 micro units were closed and 50,000 people have lost their jobs since their owners were not in a position to repay the loan. He added, major portion of this loan was borrowed from private banks. It is estimated there are over 35,000 micro units in this district which largely depend on job orders from the other majors.
The textile industry, including spinning, cotton, yarn and other mills, association has estimated they have to repay loan worth Rs 15,000 crore.
