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Why Tirupur’s Rs 42,000 crore textile hub fears a wipeout

Ramdas’s story is an illustrative snapshot of the Rs 42,000-crore Tirupur textile industry, sustained by 8,500 smallscale, medium and large firms, after the note ban.

Written by Arun Janardhanan | Chennai | Updated: November 8, 2017 9:53 am
 demonetisation, demonetisation anniversary, narendra modi, pm modi, modi note ban, Black money, Black money demonetisation, arun jaitley, GST, GST rate cut, farmers income, Tirupur, Tirupur textile industry There were 1,500 units near Tirupur Old Bus Stand before the note ban. Fewer than 500 are still doing regular business, says a local activist. (Express Photo)

Before November 8, 2016, says K S Ramdas, 48, the small stitching unit he has run next to the Old Bus Stand near Tirupur town for 20 years employed around 15 women workers and made an average of Rs 20,000-25,000 every week.

Now, he and his wife, the only remaining workers at the unit, struggle to make Rs 2,000 in two weeks.

He is not afraid to tell the authorities he can’t pay the Goods and Services Tax (GST) on the raw material he uses, Ramdas says. “There is nothing left after stitching, transportation, buying other materials and paying our loans.”

Ramdas’s story is an illustrative snapshot of the Rs 42,000-crore Tirupur textile industry, sustained by 8,500 smallscale, medium and large firms, after the note ban, says Raja Shanmugham, president of the Tirupur Exporters’ Association.

“I strongly believed that Prime Minister Narendra Modi had a serious plan (on demonetisation). We were ready to bear the pain. But at this moment, the industry here is literally being wiped out. Once you kill it, reviving it would be impossible,” says Shanmugham, adding that competitors in markets in the United States and the European Union had gained by 10%-11% in the past year.

There were 1,500-odd units such as Ramdas’s near the Tirupur Old Bus Stand, working as ancillary units for larger merchants and traders, before the note ban. M Thangavel, an activist who has been working for weavers and garment workers for a decade, says fewer than 500 are still doing regular business; others are either shut or have been waiting for an order for several months now.

Among the women workers Ramdas has laid off are his neighbours with children, who can’t travel too far for work. “Now big players badly affected by the demonetisation have stopped outsourcing (cloth) bundles for stitching works,” he says.

Senthil Kumar says he has a mechanical engineering degree, but decided to try his hand at running a similar unit, in Avinashi near Tirupur, with his father’s retirement benefits. Then came demonetisation. Unable to pay wages, he shut his unit for three months. “Orders were delayed. Then workers refused to work without wages, but there was no currency to pay them,” Kumar says.

Still, Kumar says, he thought that the pain would be brief, “that it was suffering for my country”.

But in April 2017, when he tried to open the unit again, he realised that larger factories that outsourced to him had been affected, too. “Bundles stopped coming for stitching. Earlier I had 10 workers. Now I have only four workers. I try to pay them from my pocket even if there is no work, as their condition is worse than mine, and they were with me all along,” he says.

“I lost around Rs 6 lakh. Now it’s almost certain that I am not going to get that cash back,” Kumar says.

Thangavel says changed rules in banks too, have impacted workers and entrepreneurs. “I helped 15 workers apply for a loan of Rs 5 lakh each with government subsidies to start businesses. Ten of them got approval from Tamil Nadu Adi Dravidar Housing and Development Corporation Limited, but none got their loan amount. We can’t even meet bank managers unless we have a politician’s recommendation, or are a rich person seeking huge loans.”

Shanmugham says 70% of Tirupur industries belong to the micro- and small-scale category, and have not been able to bear the double blow of demonetisation and GST. No fewer than six lakh workers and their families are affected, he says. “I supported demonetisation. But the time has come to raise an alarm about the serious crisis here,” he says, adding, “We are businessmen, we have no other agenda or motives.”

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  1. H
    harvinder dhaliwal
    Nov 21, 2017 at 6:02 am
    Please read "confessions of an economic hit man " and you will get know what and who is behind these economic policies. I live in Canada, everyone pays 13 GST, but we get free health care and free education .
    1. H
      Nov 9, 2017 at 10:28 am
      Small business below 1cr turnover have no gst. What is this writer talking about.
      1. D
        Nov 9, 2017 at 5:13 pm
        He is making an income of 25,000 per week which is 1 lakh a month. So, his turnover will be more than 1 crore. He is employing 15 people and if he pays each of them 10,000 per month, that itself is more than 20 lakhs.
      2. M
        Nov 9, 2017 at 7:18 am
        Is that no tax earlier and now heaven tax on small industries??? Unless they are avoiding tax now forced to pay small tax Or customers were dealing only in cash and generation of black economy hence suffered by demonitisation Corrupt chiddu policy killed honest people and only created corrupt society It takes time to correct Media and these writers blame gst as if these small industries are forced to pay 28 tax Trying to fool readers humbug write up If the writer is serious he should give example giving old and ne tax calculation
        1. A
          Nov 9, 2017 at 9:04 am
          Actually what has happened is simple - earlier I as a small business was able to pass service tax on to the big organisations I did business for. Essentially sole and partnership firms could do charge back or some such - forgetting the correct term. The big businesses taking our service were liable as consumer of service to pay the Service Tax. Now I have to pay GST on any items I sell, way before my income arrives. (Due to Credit period and delayed payments on top of that) add to that - I have already paid GST for any items I purchase to deliver my services and it begins to become a huge strain. While I support GST and demonetisation, this GST Payment on invoices without payments coming in is a real horror. This needs to change.
        2. Manas Sarkar
          Nov 9, 2017 at 5:52 am
          Some have genuine problem, but many corrupted people don't want to pay any tax. After note ban and GST, initially surely some problems will be there, but in the medium and long term country will be bene ed. Some businessman playing pressure tactics on govt to remove the tax. I think in some areas, govt will reduce the tax, but surely Govt will increase the area of tax Payers. GST and note ban will boost the indian economy.
          1. S
            Nov 9, 2017 at 1:10 am
            Do really you think micro scale industry and small scale industry are asked to pay Hefty GST ? ? or do you want them to do TAX Free business where they get profit alone ? ?
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