Indian spinning mills to gain from debt recast | SupportBiz

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Indian spinning mills to gain from debt recast

 
Spinning mills in India, the largest exporter of cotton yarn, will benefit from the government’s plan to restructure textile sector loans worth 350 billion rupees, according to an industry body.

Some 300 spinning mills in southern India alone, makers of yarn, will seek a revamp of their loans, said D Suresh Anand Kumar, the additional secretary of The Southern India Mills' Association.

Data from about 180 spinning mills, a majority of which are located in southern India,  indicate term loans worth 83 billion rupees and working capital loans worth 70 billion rupees are up for recast, Kumar said.

The textiles and clothing industry has incurred an 110 billion rupees loss from volatile cotton and yarn prices, according to the Southern India Mills' Association. A government cap on yarn exports added to spinners' losses, necessitating a debt recast. 

The total outstanding debt of the Indian textiles sector is 1.55 trillion rupees, according to the government. The restructuring package would be implemented on a case-to-case basis, taken up seperately by each bank, newspaper reports said Wednesday. Term loans worth 200 billion rupees and working capital loans of about 150 billion rupees are up for rescheduling, Kumar said.

In April, India registered 62.8 million tons of yarn for exports with the Directorate General of Foreign Trade, according to the association. The southern Tamil Nadu state accounts for 40 percent of India’s yarn exports. Andhra Pradesh is another large hub for spinning mills in southern India.

India's textile industry was hit hard by a surge in cotton prices, in 2011, that rose two-and-a-half times, Kumar said. Prices of the raw material climbed to 62,000 rupees a candy, or 356 a kilogram, in the first half of 2011. It is now trading at 33,000 rupees a candy, reports Business Standard. Mills had no choice but to buy cotton at peak prices, said Kumar.

In the 2010-11 financial year, the government capped the  export of cotton yarn made from domestic cotton at 720 million kg for that season, Reuters reported, resulting in huge inventories and piling losses at the spinner’s end.

Unreliable power supply and labour retention are among the issues that prevent mills in Tamil Nadu and Andhra Pradesh from producing to full capacity, Kumar said. These problems mount in the summer months when power supply typically drops and industrial workforce heads to the fields.