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CITI moots new scheme for revival of weak mills

Sudha Swaminathan

With lukewarm response to the debt-restructuring package, which was announced two years back for the revival of technically viable but financially weak mills in the country, the Confederation of Indian Textile Industry (CITI) has mooted a new scheme. The remodeled debt-restructuring fund scheme has been submitted to the Ministry of Textiles and will be presented before the Cabinet in a month's time.

The scheme aims at restructuring the debt borrowed by mills at high rate of interest to the current interest rates, said Mr Vinod K Ladia, chairman CITI. According to him, these mills were able to make gross profits but not net profits due to high cost borrowing. These mills had borrowed at the rate of 14-18 per cent. "They have the capacity to deliver provided there is a restructuring of the debt. There is a capacity of 6-8 million spindles with these mills and it should be allowed to become sick," said Mr Ladia while talking to press persons during the CEO conference organised by SIMA. While the old package allowed debt-restructuring through external borrowing by banks, under the proposed scheme CITI has sought the creation of a fund to absorb the restructuring cost which will be borne by the government and the banks. The restructuring cost is pegged at around Rs 650 crore, of which Rs 400 crore would be absorbed by the government and the rest by banks.

All leading banks have evinced interest in the new scheme and banks like State Bank of India have already done it. After restructuring, the mills could modernise or expand capacities by availing the TUF scheme. After restructuring, many mergers and acquisitions would happen in the textile industry, the need of the hour for creating large capacities.

"The problem is people are not interested in taking over a sick mill, but are willing to acquire technically viable but financially weak mills," opined Mr Ladia.