The Hindu : Front Page : Micro units hit by slowdown

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Friday, Jan 23, 2009
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Micro units hit by slowdown

M. Soundariya Preetha

COIMBATORE: Several micro and cottage industries here that do job work for larger units are closing down as they face a slump in orders.

These units are seeking financial help from the Government to continue operations as they are unable to repay the loans.

Coimbatore region has nearly 25,000 micro and cottage industries that mainly execute orders from textile, pumpset and automobile sectors for components. The investment in these units starts at Rs. 50,000 and goes up to Rs. 25 lakh. Most of them are functioning on rented premises.

Tamil Nadu Association of Micro and Cottage Enterprises president J. James told The Hindu that during the last eight to nine months, the association had received nearly 300 petitions from members that they were unable to repay bank dues. Some units had disposed of their machinery to repay the loans while some others had closed down operations.

Entrepreneurs of these units were unaware of the schemes and procedures while starting business. They also lacked the capacity to produce collateral security for bank loans. Hence, a number of them had gone in for personal loans from private banks or financial institutions to run their units.

A micro unit owner who had invested about Rs. 2 lakh and carried out job orders with just a couple of lathes needed about Rs. 25,000 for monthly maintenance and operation, he explained.

One of them said he had 13 machines and employed about 25 workers earlier. Now, the unit had just six workers as orders had declined. In the last four months, he had pledged jewels for Rs. 1 lakh to keep the unit operational. Another entrepreneur said he had taken a personal loan of Rs. 1.12 lakh in 2007 and the monthly EMI worked out to Rs. 6,271. He had paid the instalment for 13 months and was unable to do so for the last two months. Now, he was facing pressure from the bank to repay the dues, he said.

The units were hit by power cut, slowdown and financial crunch. Apart from appealing to the District Collector for moratorium to repay the loans, the association had also approached the Micro, Small and Medium Enterprises Development Institute. A cluster could be formed with 1,000 to 1,500 units and assistance provided at least for the registered ones under various Government schemes. Further, the units should be given priority for Government supplies, Mr. James said.

Meanwhile, official sources here said that some of the banks had started rescheduling the loans of “deserving” entrepreneurs, considering the current situation. A special package for the micro and small units was also expected.

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