Raja M Shanmugham
President, Tiruppur Exporters' Association

 

The Hon’ble Union Minister of Finance Shri. Piyush Goyal presented the Interim Union Budget 2019-20 in Parliament on 1st February 2019 and the budget was pragmatic and people oriented budget. The total allocation to the Textile Industry has been Rs.5,831 Crore and out of this, the allocation to ATUFS and ROSL are Rs.700 Crore and Rs.1,000 Crore respectively. The concern is that ROSL allocation of Rs.1,000 crore is lower since the apparel exports per annum is hovering around Rs.1,10,000 Crore and with the existing ROSL rate at 1.7%, the amount required would be Rs.1,700 Crore. We hope that the allocation would be revised upwards in the regular Union Budget 2019-20.

 

We are happy to note that Shri.Srinivas Kandla IAS., Joint Secretary Ministry of MSME, Government of India organized a meeting with TEA, all knitwear stakeholders Associations, Powerloom Association and CII on 9th January 2019 in Tirupur Collectorate mainly to discuss the requirements of MSME garments units in Tirupur and powerloom issues in Palladam area. We wish to point out that this meeting was a first of its kind initiative organized by top official from the Central Government and appreciate him for the same. In the meeting, Tirupur district Collector also participated and provided his views on the subjects.

 

In the meeting, the topic wise issues were elaborately discussed and the Joint Secretary has promised to send the issues to the respective ministries so as to get them addressed. The participants by and large emphasized the need to have a full pledged ESI hospital in Tirupur and we hope all issues would be addressed in the coming months.


In the RBI policy front, we wish to note that RBI has permitted for one-time restructuring of existing loans, not exceeding Rs.25 Crore to MSMEs classified as Standard will be a big relief to financially stressed knitwear exporting units in Tirupur. The requirements are borrower’s account is in default but is a ‘standard asset’ as on January 1, 2019 and continues to be classified as a ‘standard asset’ till the date of implementation of the restructuring, the borrowing entity is GST-registered on the date of implementation of the restructuring. However, this condition will not apply to MSMEs that are exempt from GST-registration and the restructuring of the borrower account is implemented on or before March 31, 2020.

The MSME knitwear exporting units have got affected further to Macroeconomic changes in the country apart from prevailing adverse factors both domestically and also externally and we have been representing to the Ministries and RBI to treat MSMEs separately and exclude them from following Basel III norms, which is meant for corporate units. Our concern is that if the repayment is delayed by one month then the banks will straight away classify the units as Special Mention Account-I (SMA-I), and if it is for two months, classify as SMA-II and for 90 days, then it will be categorized as Non Performing Assets (NPAs) per the Basel III norms. It is to be noted that the Basel norms may be applicable for corporate companies and it is too difficult for MSMEs to follow the same norms.


The Government is well aware of the functioning of our MSMEs over the period of time and they should be treated separately not at par with corporate companies. We wish to point out that the delay in payment could have been avoided, if the government had disbursed the receivable in time and therefore, the delay in repayment of dues is entirely not the fault of MSMEs. We have requested the government in consultation with RBI to device a suitable scheme instead of following Basel III norms, exclusively for MSMEs, so as to treat them separately.


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