“The textile units of Kanpur and Chennai-Kancheepuram are the most affected by COVID stress”
The Indian textile clusters of Kanpur and Chennai-Kancheepuram have been the hardest hit by the COVID-19 pandemic, with the highest proportion of loans going unpaid by December 2020, according to a report.
The country’s textile industry has been struggling since the national lockdown imposed in March of last year, with outstanding loans to the sector declining 20% year-on-year by December 2020 and loans to export units declining 25%, according to a SIDBI-CRIF report on the sector published on Tuesday.
The textile and clothing industry provides direct and indirect employment to about 10.5 Indian crore and contributes 2% of the GDP.
A recent brief survey by SIDBI of textile units in Tamil Nadu, Uttar Pradesh, Haryana and Gujarat revealed that the sector also faces several operational barriers at ground level, including high fuel prices and raw materials, challenging GST standards and delaying tax refunds. .
Almost 82% of loans granted to textile units in Kanpur had become in arrears by December 2020, with the Chennai-Kancheepuram belt reporting a default rate of 42.6% of outstanding loans. Loans are labeled past due after arrears accumulate for more than 90 days.
“Lowest in Ahmedabad”
The Pune-Kolhapur belt and the Ludhiana-Jalandhar-Amritsar textile region recorded delinquency rates of 32% and 29% during the same period. Ahmedabad and Tiruppur-Coimbatore-Madurai recorded the lowest proportion of bad debts, at 8.24% and 8.6%, respectively, compared to the overall default rate of 16.4% in the textile sector.
Among micro, small and medium-sized textile enterprises, the Punjab textile cluster recorded the highest delinquency rates with nearly 25%, followed by Chennai-Kancheepuram (23.6%) and Hyderabad-Guntur (22.8% ).
SIDBI investigation found that on-going changes to GST portal and filing of returns created confusion for units, with exporters saying obtaining built-in GST refunds a “major challenge.” . The lack of clarity on the export benefits that would flow from the new Export Duties and Taxes Remission Scheme (RoDTEP) does not help.
Most units said accessing working capital was a challenge and cash flow was limited, while “ever-increasing fuel prices” pushed up transportation costs. Rising prices for yarn and other raw materials, as well as fluctuating cotton prices, are also difficult to manage, even though export orders have slowed due to COVID-19, according to the survey.