The Hindu Business Line : Textile cos sore over suspension of loans under TUFS

The textile industry is sore over the continued suspension of disbursement of funds from the Technology Upgradation Fund Scheme (TUFS) which remained frozen for more than a month, with the latest impediment flowing from within the Textile Ministry itself.

Industry sources told Business Line here that the Financial Adviser in the Ministry of Textiles has said that the Ministry, the main implementing agency of the TUFS, should enter into a memorandum of understanding with banks and financial institutions for ensuring performance audit of the funds provided to the industry.

Since the scheme is being implemented through banks and financial institutions, their extant machinery automatically takes care of funds under the TUFS. However, for overall monitoring of the scheme, two committees under the Chairmanship of Secretary, Textiles, and the Textile Commissioner exist.

The scheme has been made operational from April 1, 1999 to facilitate modernisation and upgradation of the textile sector. Besides ensuring subsidised bank loans in the form of 5 per cent interest reimbursement for loans contracted under the scheme, the TUFS also provides for speedy modernisation of the textile processing sector when the Government introduced a credit linked capital subsidy scheme at 10 per cent for the processing sector effective April 20, 2005.

As on end-May 2006, as many as 5,222 applications (sanctioned) entailing an investment of Rs 42,065 crore had been processed in which the loan component extended to the industry was Rs 18,634.54 crore. Initially, the scheme was up to March 31, 2004 but has since been extended till March 31, 2007.

The sources said that at a time when the Textile Vision laid out efforts to capture exports worth $50 billion by 2010 in which the share of garments alone would be $25 billion, the TUFS was considered a springboard for making the textile industry globally competitive through modernisation and technological upgradation. Hence, more and more units were actively availing themselves of the scheme.

When the industry approached the Ministry of Textiles to restart the loan disbursement, the Ministry officials told the industry that its own Financial Adviser has asked it to evolve an MoU with individual banks and financial institutions for performance audit when in point of fact there was no known case of loan default or diversion from the scheme by the beneficiaries so far.

When asked about the new obstacle, sources in the Government declined to divulge details other than stating that the Financial Adviser, Textile Ministry, has asked the Department of Expenditure, Ministry of Finance, to spell out the components of the MoU as also a model framework so that disbursement could be resumed without any further delay.

The industry, on the contrary, feels that such delaying tactics at inter-ministerial level would only aggravate their problems when they are in need of funds at concessional rate for cashing in on post-quota opportunities.