The cause of concern is that the production activities have been continuously taking place to fulfill the committed orders and deliver in time, and the disruption at this crucial juncture is causing a huge impact on the financials of the units.
The Tirupur Exporters’ Association (TEA), the country’s leading knitwear/readymade garments cluster, has sought financial measures, including moratorium period for repayment of loans. The association also sought interest equalisation scheme on pre-and post shipment rupee export credits.
In his letter addressed to finance minister Nirmala Sitharaman on Monday, TEA president Raja M Shanmugham said, “To overcome the disruption in the economic activity caused by coronavirus, many developed countries — the US, Germany, Italy, France, the UK and Japan — and China have already taken a slew of financial measures like reduction of bank interest rates and cash reserve, debt moratorium provided to MSMEs, deferment of loan and tax payment without interest, including announcement of new bridge loans and credit guarantees also.”
“These countries have pumped in billions of dollars to bring the industries back to normalcy. In fact, the US Federal Reserve has cut its key interest rate to virtually zero. In line with the financial measures taken by all the industrialised countries to bailout the units out of the ongoing crisis, we also request you to take a proactive step and immediately advice the banks not to categorise the units as NPAs for non-repayment of loan and provide at least one year moratorium, which will help the units, particularly MSMEs, to sustain in the business,” Shanmugham said in his letter.
The stimulus financial package measures are also required to reenergise the market economy. The quantitative easing methodology is required at this hour of crisis to revive back the economy and uplift the business confidence of entrepreneur, he added.
It is to be noted further that the European buyers, particularly from Italy and Spain, have already asked our members not to export the garments to them and wait for minimum one or two months till the situation resume normalcy and the shops are reopened. Some of the buyers are even cancelling the orders. More importantly, the buyers are differing the payment against the promise for already sent goods also.
They are also not lifting the goods. The cause of concern is that the production activities have been continuously taking place to fulfill the committed orders and deliver in time, and the disruption at this crucial juncture is causing a huge impact on the financials of the units. The protection planning of the units have gone topsy-turvy. In the current scenario, the units, particularly MSMEs, would not be in a position to repay the loan to the banks. “We apprehend that due to non-clearance of dues, the banks may classify the units NPAs as per Basel norms. In addition to this, the dyes and chemicals prices have gone up by about 30% which will impact cost of production also,” he further pointed out.
According to Shanmugham, with the interest equalisation scheme on pre-and post shipment rupee export credit, which has been in force from April 1, 2015, for five years, expiring on March 31, 2020, the finance minister should advice the RBI to extend the scheme for at least another three years for all categories of knitwear exporting units mainly to enhance the competitiveness of knitwear exports and also to have a level-playing field in the global market.
He mentioned that the interest equalisation rate at 3% was existing to all labour-intensive categories of exporting units, including knitwear exports sector, and subsequently, the rate was increased to 5% for MSMEs since November 2, 2018.
Published On : 17-03-2020
Source : Financial Express