The Hindu Business Line : Pdexcil urges Govt to extend TUFS by 5 years

THE complete removal of quota restrictions on textile products under the WTO regime effective January 2005 may pose a threat to the domestic powerloom sector. This is because the sector is yet to be developed technologically to the same extent as in developed countries at a time when imports from developed countries will be allowed freely under the global policy.

The Powerloom Development & Export Promotion Council (Pdexcil) feels that the powerloom sector needs considerable support until it attains adequate capability technologically. Considering the fact that the sector has immense export potential, the council has urged the Union Government to take liberal measures to place this sector in a better position.

It is observed that the extent of modernisation, despite the introduction of the Technology Upgradation Fund Scheme (TUFS), is not significant. As per data available till December 2002, the powerloom sector installed 21,700 looms of which only 10 per cent was covered under TUFS and the balance 90 per cent was installed from the funds from private sources. The reluctance on the part of the financial institutions to sanction funds to this sector has also contributed to the slow pace of modernisation.

While emphasising the need for continuation of TUFS, which is to end in March 2004, Pdexcil has suggested that the scheme be extended for a further period of five years or more until the powerloom sector is modernised to the full extent. Moreover, the Capital Subsidy Scheme, providing subsidy to the extent of 20 per cent, needs to be announced as early as possible to enlarge the TUF scheme, as envisaged in the powerloom package.

The council has stated that although TUFS has been introduced, small-scale units are not in a position to avail themselves of this benefit because of the financial institutions' hesitation in providing funds to the textile sector in general. As a result, these units are compelled to take funds at high cost from private sources, thereby eroding their competitive ability and reducing marketing opportunities.

It has been suggested that FIs should give priority to small-scale units while lending. Since their requirement of funds is not considerable, compared with that of large units, it would not be difficult for FIs to extend funds at reasonable rates. Therefore, the council is of view that the Reserve Bank of India's Credit policy must favour the small scale powerloom units.

Besides TUFS and the FIs' reluctance in lending, the powerloom sector has a special point to mention in regard to the introduction of uniform excise duty as well as reduction of excise duty on fabrics and yarn.