The Tirupur Exporters’ Association (TEA) on Wednesday wrote to heads of all the banks seeking help to tide over the financial crisis faced by the knitwear exporters, mostly small units, who are reeling under the high yarn prices.
TEA has asked all the banks to handhold the exporters who are customers of the respective banks and provide ample financial assistance.
TEA president Raja M Shanmugham pointed out that the Tirupur knitwear sector is now passing through a difficult situation at its peak again due to the unprecedented surge in cotton prices of more than double and subsequent hike in the yarn prices, which also doubled compared to last year. Tirupur knitwear sector comprises 95% of MSME exporters and is solely dependent on bank funds for their operations.
He said TEA is seeking bank support from their MSME customers to tide over the liquidity crisis and help them bring back normalcy in their export business.
“Considering the need to protect MSMEs in the garment sector, we request you to kindly review the issue empathetically, handhold the customers to tide over the current situation, help for the sustenance of the units and protect the employees attached with these units,” said Shanmugham.
Tirupur garment cluster has had exports to the tune of Rs 33,525 crore in FY2021-2022 and in terms of the dollar, exports recorded $4.51 billion.
Highlighting the graveness of the issue at hand, he said that around 18 months ago, the knitwear units could buy one kilogram (kg) of yarn for Rs 200 whereas now, with the same amount, the units could buy only 400 g of yarn.
“This apparently reveals how much knitwear exporting MSMEs are now undergoing financial stress on the operational front and the major concern is that liquidity has been drained off from its sanctioned limits and MSMEs can execute only 40% of their own capacity. As an impact of a liquidity crisis, the rest of orders are also got struck up in the pipeline itself,” he said.
The price escalation cannot be easily equated with price realisation just like that as it takes its own time and ultimately, all MSMEs have got into stress and couldn’t rotate as desired or originally planned, Shanmugham added.
TEA had appealed to the textile mills associations SIMA Coimbatore, TASMA Dindigul and ITF Coimbatore to advise their members to revoke the cotton yarn price hike of `40 per kg for all counts immediately and restore it to April 2022 price level.
The association had in last week urged the Centre to ban cotton and cotton yarn exports immediately till the time prices are stabilised as the knitwear garment exporters are running out of solutions, fearing that they could not complete the orders taken already based on the previous input costs.
“We apprehend that the severity of impact on the value-added knitwear garment sector will have a cascading effect on each stage of manufacturing and thousands of workers employed with these units, apart from the banks,” Shanmugham had said in a letter to the Union textile secretary.
While the government had removed the 11% of import duty on cotton in mid-April, the textile mills on Monday increased the yarn prices by Rs 40 per kg for all counts and according to TEA, this has happened at a time when the survival of knitwear exporting units are at a stake due to various other adverse factors like Russia – Ukraine war, increase in accessories, a job working and freight charges.
He said that the softening of cotton and cotton yarn prices could be witnessed only when the government takes a serious view and ban the cotton and cotton yarn exports till the prices are regularised in the domestic market.
Published On : 12-05-2022
Source : Financial Express
