The India government’s demonetisation drive has resulted in more than 5 lakh workers employed in garment industries in and around Tirupur (Tamil Nadu) not getting paid, according to the Tirupur Exporters’ Association (TEA).
In addition to these workers who are usually paid Rs 3,000 per week, another 2 lakh workers who are employed in small and medium spinning as well as weaving mills have also been adversely impacted due to the cash crunch.
According to sources in the textile trade, an amount of about Rs 200 crore has got stuck.
A majority of these workers do not have even a savings bank account, while 70% of them are migrant workers from the northern and north-eastern parts of India, sources said.
TEA sources said that there are more than 500,000 workers employed in over 1,200 knitwear as well as units in and around Tirupur who have not been able to access Rs 3000 each.
Garment units who have been caught unawares have requested their workers to understand the serious situation after the government’s demonetisation announcement.
Production has been hit, even as garment units are trying to convince their workers to open bank accounts. These units have approached bank officials to help their workers open savings bank account as soon as possible, sources said.
Powerloom Development & Export Promotion Council (PDEXCIL) sources said that not only weekly wages could not be paid on time, but garment units themselves could not mop up necessary funds from buyers who have also been hit hard.
Southern India Mills’ Association (SIMA) sources said that there has been a 15% to 20% decline in off take of yarn from spinning mills during the last few days due to the ongoing cash crunch.
The cash crunch ensured that most of the buyers could not pay cash to get their stocks delivered.
The demonetisation drive has impacted mills in several ways, including payment for logistics costs, besides workers’ wages, cotton purchases as well as other daily cash-based transactions, sources said.
TEA sources said that it will be very tough to ensure smooth production in the coming days though there are hopes that things will soon be back to normal as soon as banks are flush with cash.
Sources also said however, that the demonetisation drive is not expected to impact exports at this point of time.