GST, Demonetization, Foreign Money Kill Tirupur Businesspersons

It is not only farmers, even micro, small, medium businessmen are in deep trouble due to the 4 years of Modi’s misrule. Demonetization shattered the knees of small businesses, GST broke their backbones and the appreciating rupee (caused by flow of speculative finance capital into Indian share market) choked the businesses to death.

Not being able to bear the losses and denied all support from the government these small business persons have taken their own lives. 

This is one of the worst phases of Indian economic history.

Following News Report Courtesy : Times of India

An Industry in Distress

  • Number of apparel related companies in Tirupur – 8,000
  • Micro manufacturing units (machinery investment upto Rs 24 lakh) – 90%
  • Small units (investment upto Rs 5 crore) – 9%
  • Medium companies (investment between Rs 5 crore and Rs 10 crore) – 1%
  • Large scale companies with more than Rs 10 crore investment – 40
  • No of Workers employed – 8 lakh
  • Export turn over of readymade garments – Rs 26,000 crore
  • Domestic turnover – Rs 18,000 crore

The past 6 months have witnessed a spurt in suicides due to loss in business

  • October 11, 2017 – N Srinivawan, 51, killed himself after suffering losses in business
  • December 31, 2017 – V Manikandasamy, 40, committed suicide after his business floundered after GST and demonetization
  • March 9, 2018 – K Palaninathan, 49, hanged himself after being made responsible for a loss of Rs 25 crore in business which he was running as a benami to two investors
  • March 12, 2018 – S Sunganthi, 31, – owner of a micro knitwear garment manufacturing unit – committed suicide due to loss in business

S Suganthi, 31, was an embodiment of all that Tirupur entrepreneurs are made of — ambitious, hardworking and entrepreneurial. She inspired many when she started a micro garment manufacturing unit at Vengamedu in Angeripalayam, a couple of years ago. She wouldn’t have imagined that a day would come when she would have no money to recharge her phone. But she met that fate on March 12 this year and hanged herself to death that day.

Tirupur has enough success stories of self-made businessmen who worked their way up from scratch. But of late there seems to be a spurt in business failures, driving entrepreneurs to suicide. Suganthi’s is the fourth suicide of an entrepreneur in Tirupur’s knitwear industry in the past six months. With a large migrant population plagued with socio-economic problems, Tirupur always topped the suicide chart in the state. But, now the slumping numbers in the textile industry have alarmed veterans and beginners alike.

The industry since 2008 has witnessed constrains including global economic recession, steep rise in yarn prices, closure of dyeing units and labour issues. “But now, aggressive international competition, business slowdown in the wake of demonetisation and GST have made survival a big question,’’ said S Govindappan, vice-president of South India Hosiery Manufacturers Association.

விவசாயிகள் பணநீக்கம்

There is a cascading effect. Competition from countries like Bangladesh and Vietnam has chipped off global orders from Tirupur. When business falls for large enterprises, orders to smaller units also dry up, like it happened in Suganthi’s case. Banks and private lenders have tightened their purse strings when it comes to helping small businessmen in crisis. On the day of Suganthi’s death, her husband went out to borrow money but had to return empty handed.

V Manikandasamy of Sankaradampalayam, who committed suicide in January this year, had a huge debt to repay to banks, but no orders to earn that money. His wife Sri Vidhya blames government policy for his death. “Tirupur always gave hope. Now that has been taken away since the chances of surviving a business failure has thinned,” she said.

It started with rupee appreciation or US dollar/Euro depreciation, ahead of GST implementation. It was a time when the knitwear industry was already losing its international competitiveness. The Centre promised that GST would bring down prices of raw materials but it did not happen,” said T R Vijaya Kumar, general secretary, Tirupur Exporters’ Association.

Bigger companies have the means to weather crises, but small players suffer. They were not prepared to take the blow of drastic reduction in incentives given to exporters and stringent GST norms. “Small units, especially those who availed huge loans for expansion are finding it hard,” said M P Muthurathinam, president of Tirupur exporters and manufacturers’ association.

Industry sources say the Centre has not cleared more than `1,900 crore dues including GST returns, duty drawback and RoSL. “But the same government has failed to restrain to its tax collecting agencies or banks to be lenient with entrepreneurs on repayments” said Vijayakumar.

R Annadurai, managing trustee, Tirupur Thozhil Pathukappu Kuzhu (foundation for protection of Tirupur industries) said the organisation has formed a new wing consisting of a psychiatrist, a retired general manager of a nationalised bank, and an advocate to “counsel entrepreneurs and workers who show suicidal tendencies and help them solve their financial woes”. Thirugnanam, a member of the foundation says around 10 entrepreneurs have committed suicide due to the business-related issues in the past two years.

While companies send a consignment, they have to pay 100 % GST to the government. But the buyer may take up to five months to settle the entire amount. Till then the company must be able to bear the burden of the unpaid dues. “This was the practice for several years. But now tax collection has become stringent.

Though government says GST for textiles is only 5 % there are hidden taxes and we pay up to 13 % tax, which becomes a unbearable for small and new players ’’ said K S Babuji, secretary, South Collar Shirts and Inner Wear Small Scale Manufacturers Association.

With the exports witnessing a consistent fall since mid-2017, industry experts say it’s time the government relaxed tax norms and offered incentives to help entrepreneurs tide over the crisis. “The Centre is making macro-economic corrections like demonetisation and GST. But it has failed to realise the importance of micro hand-holding supports like providing right rate for duty drawback and other incentives,” said Raja M Shanmugam, president of Tirupur Exporters’ Association.

News Source : What ails Tirupur’s textile mills?

Images : file photos from the internet

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