Interest Rates for Textile Exporters: Textile Industry is one of the major contributors for India’s export basket. It contributes 12% of India’s total foreign exchange receipts. Country is self-sufficient in Textiles and is not dependent on imports. It was projected by then Planning Commission that Textile exports will grow by 12% in coming years. In light of this, we believe there should be encouragement for Textile exports. We expect interest rates for Textile exporters should be capped at 7%. This will significantly reduce the Interest payment burden of Textile exporter and attract more and more investments.
Continuation of Interest Subvention: Textiles is identified as a priority sector for encouraging investments. Cost of credit is a major concern for Indian Textile Industry. To ease this burden, the Government had launched “Interest Subvention Scheme” which was discontinued in 2014. This scheme needs to be continued for next 3 to 5 years.
Scheme for Mega Textile Park: World Textile Industry size US $ 705 Bn FY 2012-13 and India’s share in world textile market is mere 4% as compared to China’s 35%. The Industry needs to focus on achieving larger share in global markets. To achieve this, Textile industry needs investments in Large Scale Industries (LSI) and Mega Projects.
Simplify and speed up TUFs refund process: Perennial complexities in getting TUF refunds make the process time taking. Exporters are required to file the claims through banks to Textile Commissioner’s Office (TxC) and in turn will be submitted to Ministry of Textiles. On availability of required funds from Ministry of Finance, Ministry of Textiles will approve claims and send it to Pay and Accounts office, who will give credit to banks. Finally banks distribute funds to respective exporters. This entire process takes around 5 to 6 months. Exporters lose working capital for this period.
Encourage Skill Development in Textiles: Textile Industry is the second largest employment generator after Agriculture. Skill development has been identified as one of thrust areas by the Government of India. We propose that Textile Ministry should devise a policy for developing multiskilling institutes through Public Private Partnership (PPP). Current scheme for skill development devised by Textile Ministry does not give reimbursement of expenditure on Infrastructure for training institutes, which should be given in the future. Training Syllabus should be made common across the country which will make beneficiary employable across the country.
Identify solar energy generation as a priority sector and provide a separate sectoral limit for lending: Solar energy should be made a priority sector and excluded from conventional power sector with a different sectoral cap, such that banks are encouraged to lend to the sector. Also group exposure limits need to be removed. RBI needs to relax the provisioning requirement of banks for lending to Solar Sector as it directly impact loan cost.
Solar Power faces financing challenges from scheduled commercial banks. The main reason for banks’ lack of interest is that solar comes under the aegis of the ‘power sector’ and as such the power sector lending caps have already been reached and in some cases, been exceeded. We believe Group exposure limits are constraining growth of the sector.
Solar projects need cheaper funding sources: Government must Raise ECB limits, Tax-free RE bonds, Special Infrastructure RE Bonds, International long-term loans from multilaterals, bilateral and explore and encourage other international donor organizations. Refinancing of domestic debt availed for solar sector by ECB loans should have automatic approval. Lending guidelines of PFC, REC, IFCI , IREDA related to solar – needs relaxation in RoI (< 10.5%), DSRA requirement, Longer Loan Tenure, Sectoral limit etc.
Currently, solar projects have high dependency on domestic bank financing. Domestic projects have high cost of financing due to dependency on local funds – increases risk and poses limitation on project viability. Currently institutions like PFC, REC, IFCI and IREDA (promoted by Central Government and MNRE) are lending at 12.50% to 13.50% – making many projects unviable.