The spinning sector in India needs immediate attention. In view of the weak financial position and reduced cash flows, the sector needs immediate extension of interest subvention. A huge proportion of spinning mills in the country have a low non-investment grade rating that could deny them any scope for further borrowings from banks. This means, the financial health of the mills has been deteriorating and non-performing assets (NPA) rising.

Not only is profitability of spinning mills diminishing, the average EBITDA margins (earnings before interests, taxes, depreciation and amortization) declined sharply in the case of large mills from 14.8 per cent in 2013-14 to 11.3 per cent in 2014-15 fiscal. Similarly, EBITDA margins of small sized mills declined from 7.7 per cent in 2013-14 to 4.7 per cent in 2014-15.

Extending interest subvention would boost the prowess of labor-intensive spinning sector and reduce NPAs of public sector banks. Every additional Rs 10 lakh revenues in the spinning sector could generate employment for 16 more people.

As of December 2014, public sector banks reported gross NPA of 10 per cent of their advances to the cotton-based textile sector against five per cent registered in December 2012.