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Mounting losses of National Textile Corporation

National Textile Corporation (NTC) which manages through its nine subsidiaries set up in different parts of the Country, 119 textile mills taken over by the Union government from the private sector business houses, is in a dire state. It’s estimated losses for 2001-02 are placed at Rs 1189 crore on top of around Rs 1,089 crore for the previous year. It has little wherewithal to run even its own mills which are in tolerably good condition. Survival of many of these mills is in doubt.

Out of its 199 textile mills, only 25 were in normal operation in 2001-02 against 35 in the previous year. Four more units were closed down, taking the number of closed units to 44 from 40 a year ago. The number of units operating partially increased to 53 from 40 during the period.

It may be interesting to note that all these mills once belonged to private sector companies. In many cases private entrepreneurs diverted large funds from their mills to other industries. In several cases, they ignored the needs for modernisation of their textile units. When these mills started falling sick, the industrial houses concerned were not ready to bring back the funds and contended that they had no money to invest for the revival of their sick textile units. They did not mind even if these textile units closed down, as they had already established other more profitable ventures elsewhere. In order to safeguards the interests of workers employed in such ailing textile units, the Union government started taking them over from the hands of private sector companies. The National textile Corporation was set up as a holding company in 1968 to manage such taken-over units, through various subsidiaries. Most of these subsidiaries are however in a perilous situation and their cases are already with the BIFR.

When the Union government took over these textile mills from the hands of the private sector, it probably thought that it would be able to put in the necessary funds to modernise and expand them and bring them back to health. No doubt, plans for the purpose were drawn up from time to time, but these remained mostly on paper as the government could not provide the necessary funds. As a sequel the condition of these taken-over mills continued to deteriorate with only 25 out of 119 units now remaining in normal production.

Installed capacity of these units remain heavily under utilised as most of them are facing acute shortage of even working capital. These mills had about 34.03 lakh spindles and 32,454 looms around the middle of the last year, but now only 26.49 lakh spindles and 18,972 looms seem to be operational.

In view of money stringency, some of these units manufacture yarn and fabrics partly on their account and partly on job work basis. Apart from shortage of funds, these units also face the problems of frequent stoppages of work. Yet the idle labour has to be paid their dues. That apart, markets for textiles are subdued at present.

During the first three months of 2001-02, these mills produced 9 million kgs of yarn for their own purpose and five million kg on job work basis. Thus their aggregate production for 2001-02 was anticipated at 56 million kg, against 66 million kg for the previous year. Its aggregate production of fabrics for the year was estimated at 40 million metres against 44 million metres in the earlier year. Thus production of both cotton yarn and fabrics came down during the year.

The turnover of yarn for the year was estimated at Rs 360 crore and that for fabrics about Rs 360 crore against Rs 462 crore and Rs 112 crore, respectively in the earlier year. The NTC group had on its role 82,343 employees in June 2001 as compared with about 84,642 a year ago. About 1,535 employees left, by accepting VRS. NTC will offer VRS to more employees to reduce the workforce which it could not sustain. However, lack of fund is coming in its way to implement such proposal.

It is proposed that these NTC mills should be encouraged to sell their land to raise fund. But it has not been possible so far to put through any such proposal as the land on which these units have been set up cannot be easily sold without the cooperation of the states concerned.

As many as eight out of the nine subsidiaries of NTC, have their cases referred to the BIFR. Under the provisions of the Sick Industrial Companies (Special Provisions) Act. The BIFR have circulated Draft Revival Schemes (DRSs) prepared by operating agencies. These revival proposals have suggested that only 44 mills can be revived and as many as 60 may have to be closed down after offering VRS to the affected employees.

It might be interesting to note that when the government took over these sick textile mills it hoped to be able to modernise them all and make them viable. But these hopes have fallen flat mainly for want of funds. Had any such project been taken up as soon as these mills were being taken over, it would perhaps been a different story altogether. However, the government could not provide the necessary resources. Even now it has no funds to spare for the purpose. But it is contemplating to raise the money for VRS through the sale of surplus mill lands by August or September next. It remains to be seen what happens at that time.

- M D Dewani