This, however, being a conservative figure, the actual outstanding would cross over Rs 1,000 crore for the raw material supplied, they said.

Despite the increase in cotton prices ranging from Rs 700 to Rs 800 per candy in recent weeks, the suppliers were not keen to supply cotton to the mills following difficulty in realising the payment, the sources said.

Nareshbhai Merchant, president of CCA, at its annual general body meeting held recently, attributed the present plight and crisis in textile mills to the increase in the number of spinning mills and over-production.

The mushroom growth of textile mills, especially in the small-scale sector, had resulted in over-production without any corresponding demand for the yarn, he had pointed out.

Further, the alleged evasion of excise duty and sales tax by a numberof mills were also responsible for the 'cut-throat competition' with a section of mills indulging in undercutting of yarn prices, the association noted and appealed to the government to announce a freeze in the spinning capacity immediately.