The Hindu Business Line : `Discontiuning tech upgradation fund scheme will hit textile sector growth'

Negative effects
Absence of capital investment-supportive scheme of TUFS may nullify the success achieved in other centrally sponsored schemes
Promotion of textile infrastructure projects such as the scheme of integrated textile park would lose sheen without TUFS

Coimbatore , Dec. 9

Any move to discontinue the technology upgradation fund scheme (TUFS) for the textile sector beyond March 2007 would lead to the collapse of investment plans drawn by the textile industry for the 11th Plan period.

Such a move may also erode the competitive edge wielded by the Indian textile sector in the global market because different free trade agreements signed by the country are expected to come into force only during the period, according to Southern India Mills Association (SIMA), the apex textile trade body.

Expressing apprehension over recent media reports suggesting that the Union Government is not keen on giving an extension to the operation of TUFS beyond March 2007, when the tenure of the scheme would expire, the SIMA Chairman, Mr S.V. Arumugam, noted in a communication that revival of the domestic textile industry took shape since 2003 due to Government's proactive measures such as fiscal policy changes, low interest regime and thrust for modernisation under TUFS.

Modernisation Pace

Though TUFS evoked very little response due to stiff eligibility norms initially, it later on picked up in the last couple of years. Capacity constraints of domestic textile machinery manufacturers in the meantime impeded the industry's modernisation drive, forcing them to depend on imported machinery. Import of textile products from China also put some of the domestic textile sector in difficulty. In this scenario, if TUFS is not extended beyond this fiscal year, it would only further compound the industry's woes, he said.

The absence of capital investment-supportive scheme of TUFS may also nullify the success achieved in other centrally sponsored schemes such as technology mission on cotton, which led to higher domestic cotton output. A sluggish capital investment for capacity expansion by the industry would in turn lead to drop in cotton consumption, thereby affecting the farmers and cotton economy of the country, Mr Arumugam noted.

Promotion of textile infrastructure projects such as the scheme of integrated textile park would lose sheen without TUFS, especially when the weaving and processing sectors were yet to catch up with the modernisation pace. The need for continuing TUFS in the 11th Plan assumes all the more importance given the fact that the domestic textile sector is poised to attract Rs 2-lakh crore investment, 15 million jobs and $110 billion business volume by 2012, the SIMA chief pointed out.

Vital to offset high capital cost, says Texprocil

The continuation of technology upgradation fund scheme (TUFS) into 11th Plan period is necessary for stabilising the competitiveness of domestic textile sector, the Cotton Textile Export Promotion Council (Texprocil) has said.

The industry has envisaged to attract an investment of Rs 1.9 lakh crore by 2012 to attain a market size of $110 billion at an annual growth of 13 per cent.

To achieve this, the industry needs investments which have to come from TUFS, Texprocil said, adding that since the industry heavily depends on expensive imported machinery, the scheme becomes essential to offset the high capital cost.

Making a case for further extension of TUFS, the Texprocil Chairman, Mr Prem Malik, said that the industry had shown turnaround due to progressive policies of the Government especially TUFS. In the case of yarn, it could show an increase in production without significant increase in operational spindleage, indicating that the funds under the scheme have been used for modernisation and productivity increase.

Similarly, the production of fabrics too recorded 4.5 per cent cumulative annual growth during 2002-06 mainly due to the scheme.

The processing sector also gained under TUFS with almost 22.3 per cent of the total investment going into this sector during April-September.

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