After power distribution and aviation, the government is now looking into the concerns of the ailing textile sector and is considering loan restructuring for textile firms. A panel of representatives from the textile ministry, finance ministry and banks is set to meet the industry to discuss their financial concerns, reports CNBC-TV18's Malvika Jain quoting sources.
The meeting is scheduled on December 7. According to data on the website of the Bombay Stock Exchange out of 287 listed textile companies around 122 have reported losses in the Q1 of 2011 and the picture has not really improved even in the Q2.
This is possibly because foreign demand from western countries as they basically account for a 65% of the total textile exports from India. It is also being said may be because of increase in input costs.
The banks have a total exposure of about Rs 80,000 to Rs 1 lakh crore to the entire sector including unlisted companies. While so far none of these companies have reported major defaults, they fear that due to the fall in demand these companies may report defaults going forward.
Sources say that the dismal picture of profits is probably a negative indicator and they have sought two things. One is repayment of principal amounts on long-term loans should be postponed for the next 24 months and also there should be easier norm for working capitals for the next five years.
The finance ministry had, earlier, received a note from the textile ministry seeking their support in restructuring of loans, but it remains to be seen what final decision will be taken by the government in this regard.
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