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G. Gurumurthy

Coimbatore , July 8

The textile industry's hopes of securing the Union Government's nod on extending the tenure of the on-going technology upgradation fund scheme (TUFS) beyond March 31, 2007 have been dashed with the Textiles Ministry asking the TUFS nodal agencies/banks not to process any more new loan proposals with immediate effect.

A circular to this effect was issued by the office of the Textile Commissioner, Mumbai, to all the nodal agencies/banks, textileindustry sources here said.

The circular, according to the sources, has cited that while the estimated budget provision made for reimbursing the interest subsidy for the TUFS loans for the fiscal 2006-07 is only Rs 535 crore, the required funds for the subsidy payment as of now works out to about Rs 1,515 crore, three times higher than the allocation. With the process for securing the additional funds released still pending with the Finance Ministry, the Textiles Ministry has stopped loan sanctions.

Jolt to exporters

Expressing shock , the Tirupur Exporters Association (TEA) representing the knitted garment exporting sector, a key beneficiary of the TUFS, has regretted that the move has come at a time when the whole textile industry has been pleading with the Centre to extend the operation of the scheme up to 2010. Halting the scheme abruptly even before it reached its scheduled expiry time of March 31, 2007 would defeat the very purpose of the scheme intended to usher in modernisation and capacity building to face global market challenges, the Association President, Mr A. Sakthivel, said in a communication.

Reasons for extension

The opening up of global textile trade and the quota abolition by 2005 improved the investment sentiments, which made the promoters of textile projects pursue the TUFS investments seriously only in the last two years. Among the reasons put forth in favour of extending the TUFS tenure beyond 2007 were the non-availability of quality textile machinery/technology through indigenous sources and China's entry into the WTO fold by 2008. While the former has forced the investors in textile projects to search for suitable machinery, the latter, according to industry sources, has given some extra time to evolve their production/technology strategy.

Of the 4,184 project proposals sanctioned under the TUFS involving an aggregate project cost of Rs 14,260 crore as on end-January 2006, the number of TUFS proposals cleared were 3,544 and the loan disbursed were Rs 11,000 crore.

CITI petitions Centre

Our Delhi Bureau reports: The textile sector has expressed disappointment over a circular to nodal agencies and banks to stop issuing fresh loans under TUFS. The Confederation of Indian Textile Industry (CITI) has petitioned the Union Government to allocate necessary funds for the scheme and continue clearing projects under TUFS.

"While inadequate allocation is a serious problem for proper implementation of the scheme, suspension of sanction under the scheme has given a wrong message to the industry and dampened its enthusiasm for modernisation and expansion," the CITI Chairman, Mr Hiren Shah, said in a letter to the Textiles Secretary, Mr D.P. Singh.

"During the current year, there are huge projects being planned in various segments of the industry and investments are likely to be considerably higher than those of last year. Suspending sanction of TUFS loans at this juncture has the potential to halt this momentum in capacity building," CITI said in the letter.

More Stories on : Textiles | Modernisation

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