India’s textile clusters in Kanpur and Chennai-Kancheepuram have been worst hit by the COVID-19 pandemic, with the highest proportion of loans turning delinquent by December 2020, according to a report.
The country’s textiles industry has been in trouble since the national lockdown imposed in March last year, with outstanding credit to the sector falling 20% year-on-year by December 2020 and loans to export units falling by a sharper 25%, according to a SIDBI-CRIF report on the sector released on Tuesday.
The textiles and apparel industry provides direct and indirect employment to an estimated 10.5 crore Indians and contributes 2% to GDP.
A recent short survey carried out by SIDBI of textile units in Tamil Nadu, Uttar Pradesh, Haryana and Gujarat revealed that the sector also faces several operational roadblocks at the ground level, including high fuel and raw material prices, challenging GST norms and delayed tax refunds.
Almost 82% of loans extended to textile units in Kanpur had turned delinquent by December 2020, with the Chennai-Kancheepuram belt reporting a delinquency rate of 42.6% of outstanding credit. Loans are labelled delinquent after past dues accumulate for more than 90 days.
‘Lowest in Ahmedabad’
The Pune-Kolhapur belt, and the Ludhiana-Jalandhar-Amritsar textile region reported delinquency rates of 32% and 29% in the same period. Ahmedabad and Tiruppur-Coimbatore-Madurai recorded the lowest proportion of loans going bad, at 8.24% and 8.6%, respectively, compared with the overall delinquency rate of 16.4% in the textiles sector.
Among micro, small and medium textile enterprises, the textiles cluster in Punjab reported the highest delinquencies at almost 25%, followed by Chennai-Kancheepuram (23.6%) and Hyderabad-Guntur (22.8%).
The SIDBI survey found that ongoing changes in the GST portal and filing of returns has created confusion for units, with exporters stating that getting Integrated GST refunds is a ‘major challenge’. The lack of clarity on the export benefits that would accrue under the new Remission of Duties and Taxes on Export Products (RoDTEP) scheme, isn’t helping.
Most units said access to working capital was a challenge and cash flows were constrained, while ‘ever-increasing fuel prices’ have escalated transport costs. The rise in yarn and other raw material prices, and fluctuating cotton prices, are also difficult to cope with, even as export orders have slowed down due to COVID-19, the survey found.