• Investment World
• eWorld
• Catalyst
• Mentor
• Life
• Canvas
• Praxis
• Urban Pulse
• Brand Quest

G. Gurumurthy

Coimbatore , Dec. 29

THE small scale textile producers, including the SSI spinners and the powerloom cloth weavers, have put up a case for incentivising those portion of the capital investment brought by them outside the institutional funding route to fund their modernisation projects under the technology upgradation fund (TUF) scheme.

These small textile producers from Tamil Nadu who largely belong to the SSI spinning and the decentralised powerloom industries plead for passing on the concessional interest benefits of the TUF to cover those funds mobilised by them on their own outside the banking/institutional borrowing routes. They point out that in recent years, a good chunk of their new investment on plant and machinery for the textile projects has been made through this way only as the highly dispersed/tiny characteristics of their businesses, most of them being proprietorial/partnership oriented ones, do not have the required leeway to get institutional lending.

These small textile producers have made their views on this aspect known to the National Coordinator, TUFS Impact Evaluation Project, Dr M.D. Teli, who had last week undertook a visit to Tamil Nadu's key textile clusters including Tirupur, Palladam and Erode.

The Head of the Textile Department at the Institute of Chemical Technology in the Mumbai Unviersity, Dr Teli has been commissioned by the Union Textile Ministry to assess the impact of the operation of the TUFS for the textile and jute sectors. The TUFS impact evaluation would cover nearly 17 sectors involved in textiles, jute, woollen industries.

According to industry/official sources here, Dr Teli as part of his impact assessment sessions had separate meetings with the members of the small spinners, hosiery industry of Tirupur and the decentralised powerloom weavers represented by their regional/local trade bodies in Palladam and Erode besides the members of the organised textile industry as represented by the Southern India Mills Association (SIMA). These meetings took place on Dec.25 and 26 last.

Incidentally, one of the points reportedly found echo in the interaction between the National Coordinator for TUFS Impact Evaluation Project and the members of the powerloom and small spinners is the low TUFS credit absorption among the SSI textile producers in Tamil Nadu and Dr Teli was said to have wanted to know the reasons for this.

The small spinners, as represented by the South India Small Spinners Association, pointed out in the interaction with Dr Teli the minimum economic size (MES) of the spinning sector prescribed under the TUFS was the dampener on availing of TUFS loans by their members. The 12000 spindles as the MES for TUFS loan consideration should be dispensed with and instead the market oriented approach should guide the TUFS guidelines on investment, the sources told Business Line.

To support their claims for covering the private investment for TUFS project for the 5 per cent concessional interest, these members maintained that while the TUFS norms had pegged the promoters margin in a TUF project at 20 per cent, the lending agencies/FIs insistence on a debt equity ratio at 2:1 went against the investors who had their margins at 33 per cent of the project cost as the concessional interest benefit would be restricted to only the 67 per cent term loan assistance extended by the banks.

These two aspects, according to the members, made the TUF schemes a non-starter among the small textile producers.

As for the Powerloom weavers involved in promoting new projects, it was pointed out at the meetings at Palladam and Erode that several hundred units in the region have in recent months gone in for induction of second hand automatic weaving machines imported.

Among the popular used weaving machines that found their way in this part of the country are TW-11, PU-153 and P-7100, P7200 and P7150 models.

Almost all the importers of these used loom models pleaded that the 10 year vintage and the minimum residual life of 10 years prescribed by the government worked against the TUF scheme as it is restricted the weavers from availing themselves of TUFS for used imported looms with a vintage beyond 10 years.

The powerloom weavers argued that while they are against government prescribing the minimum residual life of the import used looms, they are constrained by the limitations caused by the prescription of the vintage model as the productivity achieved in the machines much older than the prescribed 10 years remained higher considering thatcost of these machines remained economically viable for the weavers.

Similarly, they also told Dr Teli that there was a need to relax the 20 per cent upfront capital subsidy scheme norms of the TUFS for the powerloom sector so as to extend the investment ceiling permitted under this route to Rs 2 crore instead of the present ceiling of Rs 50 lakh.

This is necessary to encourage the weavers to install at least 6 shuttle-less looms, which would constitute the minimum economic size (MES) of a weaving shed in modernised weaving industry.

Article E-Mail :: Comment :: Syndication

Stories in this Section
GDP growth fails to check plunge in jobs

Copyright © 2003, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line