Senior industrialists in Coimbatore feel the present crisis is mainly its own making and discount claims that the rising cotton prices has brought the industry to the brink of sickness. Successful entrepreneurs say lack of professional management, capacity expansions through high cost borrowings without assessing the demand coupled with poor reserve provisions during boom period has led to the so called crisis.

Though no statistics are available as to the number of mills closed during the last two years, reports of production cutbacks and running of mills on job conversion basis are flowing in from all quarters. Four mills in the organised sector -- Ganga Textiles, Rajalakshmi Mills, Coimbatore Pioneer Mills and the Kongarar group -- registered poor performance during 1996-1997. Ganga Textiles, of the Rajshree group, has alreadydowned shutters and Rajalakshmi Mills is on the verge of closure. Coimbatore Pioneer reported 50 per cent erosion of its networth and Kongarar was referred to Board for Industrial and Financial Restructure (BIFR).

``The mills expanded without adequate linkages in place. Capacities were added and yarn production went up,'' GK Sundaram, the octogenarian Chairman of the monolith Lakshmi Mills Company Ltd, said. ``The spinning sector developed too fast neglecting the other sectors and we still have to depend on handlooms, powerlooms and hosiery. The offtake now is poor and unless forward integration takes place fast most of the mills may have to close down,'' he added.

Most industrialists are now banking on the speedy execution of the proposed Rs 25,000 crore textile upgradation fund, earmarked for the weaving and processing sector, so as to improve yarn offtake.

Though the cotton prices went up by an average of 25 per cent during first three months of 1998 compared with the corresponding period in 1997,the increase in cotton yarn prices did not behave correspondingly. The cotton yarn prices increased by 7-10 per cent during the first three months of 1998, mainly due to the glut in the market.

There are reports of stock piling up in some of the mills during the last three months. Lakshmi Mills, for instance, has about 4.70 crore worth stocks in its upcountry godowns and carries mill stock worth Rs 8.70 crore. The company, which has a market share of 20 per cent in superfine counts, has cut production by 10 per cent for April. ``There is practically no demand for superfine counts and the substitutes (blends) are not moving fast,'' said Sundaram. The mill has also stopped production of plain cloth in 30 of its airjet looms from April ``due to poor demand and increased cost of production''.

``The managements have to realise that increasing productivity, being cost conscious and continuous monitoring of the day-today affairs have become imperative for sustenance. The mills have attained professionalism onthe technical side but it is not so in the case of marketing,'' said Indra Doraiswamy, the Director of South India Textile Research Association (SITRA).

According to a study conducted by SITRA, the industry had made a net average loss of 4.40 per cent of the total sales in 1995-1996 and 0.80 per cent in 1994-1995 compared with the average profit of 4.30 per cent of the total sales in 1993-1994.

``Most mills failed to plough back the money realised during the boom. They went on an expansion spree with high cost borrowings. The time has come for us to continuously monitor all aspects from cotton purchases to selling yarn. Borrowings and financial ratios have to be kept under healthy jurisdictions,'' said D Varadrajan of Sri Vardaraja Textiles.

The earlier generations preferred financial stability but despite the majority of the third generation being highly qualified the thought of stability is found wanting, he said. Varadaraja Textiles caters exclusively to the domestic requirements and hank yarn formsover 80 per cent of the total production. The mill works only six days a week, the only one in this region, ``so as to provide a day for maintenance of the machines''.

``The present situation is a natural course of supply and demand problem. The fittest will survive and the government has no role to play,'' said A R Guruswamy, the past chairman of Southern India Mills Association. He was also for a freeze in capacity expansion.

However, Sundaram feels the government should participate actively in boosting exports. ``The local worries can be reduced if the government works closely with Commercial Attaches of embassies and prepare foundations for exports to non-traditional countries,'' he said. He too was for a temporary freeze on adding more spindles and a radical change in the labour laws.

The spinning industry is opposed to any further financial aid to the sick mills, especially those under NTC and co-operative sector. ``If the sick mills are discouraged from producing yarn the market will improve,''they claim. Tamil Nadu has around 18 co-operative mills and over a dozen NTC mills.