Financial Daily from THE HINDU group of publications
Wednesday, Jan 29, 2003
Industry & Economy
Italian line of credit outlay for textile SMEs may be increased
COIMBATORE, Jan. 28
BUOYED by the opportunity for higher credit deployment in the small and medium enterprise-dominated textile sector, the National Small Industries Corporation (NSIC) may try out a higher funding under the Indo-Italian line of credit focussing the textile SME-exporters, especially the potential export clusters such as Tirupur or Karur.
A high-level official team from the NSIC that recently visited Tirupur textile cluster to study in detail the techno economic viability of the units interested in availing themselves of the Italian line of credit are looking at the scope of operating a higher credit outlay under the Italian credit programme.
At present, NSIC has been operating the Rs 20 crore Indo-Italian line of credit for the benefit of SMEs in eight sectors, which include textile industries also.
"We are exploring the possibility whether a significantly higher quantum of Italian credit line, say Rs 100 crore, could be run to assist the small and medium textile enterprises," the Executive Director (business develoment) of NSIC, Mr A.K.S. Rathore, told Business Line recently.
Mr Rathore, who headed a high level official team from NSIC headquarters that visited the Tirupur textile cluster recently, felt that the impact of running a credit programme of this nature all along might not have been felt due to the quantum of the fund being not large enough. The NSIC team's visit to Tirupur this time was to have a first hand idea of the techno-economic viability of the projects, which have sought credit assistance under the overseas credit line programme.
The team that whetted four project proposals lined for a total credit assistance of about Rs 7 crore went into the project details including the project documentation and security aspects. The team had wanted to give a push to the new project proposals seeking the Italian soft line of credit that gets competitive interest rate to the promoters at 9 per cent. Since the Indo-Italian line of credit is approved under the TUFS scheme for the textile sector, credit is entitled for the 5 per cent interest compensation from the Government of India, which leaves the final interest charge for the user industry at 4 per cent.
The NSIC's confidence of operating a higher quantum of Indo-Italian line of credit stems from the fact that Italian textile companies, seeking to firm up garment/fabric outsourcing from Indian textile clusters, especially from the Tirupur based units by 2004-end, are vigorously pursuing the joint venture/outsourcing project possibilities. This will mutually benefit the industries in both the countries, especially the Italian textile machinery makers.
NSIC too has put its participation in the cluster-development programme on top of its agenda, which means it would derive added synergy to the corporation's programme of developing raw material consortium for the SMEs in such established textile clusters.
In the meantime, the prospective applicants for the Corporation's Indo-Italian soft loan could enjoy some minor relaxation the NSIC has brought in the norms fixed for the collateral security provided by the promoters.
As against the earlier collateral of 50 per cent of the cost of the machinery funded, the promoters are required to offer only 35 per cent collateral under the line of credit.
Another good news for the soft-loan seekers is that both the Government of India and the Italian government have now agreed to extend the term of the line of credit by one more year. The credit line, which is to expire by December 2002, has been extended till December 17, 2003, it is officially learnt.
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