Textile industry welcomes Restructured Technology Upgradation Fund Scheme

The textile industry has hailed the Restructured Technology Upgradation Fund Scheme announced by the Ministry of Textiles on Thursday. The scheme, effective from April 28, is expected to continue till the end of the current fiscal.

“The withdrawal of the TUF scheme in June without prior intimation sent shock waves within the industry, as the industry was gearing up to compete with global standards both in modernisation and technology advancements. We have always maintained that the Indian spinning sector was well equipped with modern machinery.

“But the modernised/upgraded spindleage is just around 15 million out of the total capacity of 45 million spindles; it is far less in the weaving sector. Less than 1.5 lakh looms are shuttleless out of the 22 lakh looms and in the processing sector, we have a long way to go,” an industry source told Business Line , reiterating the need for continuation of TUF.

The TUF scheme, introduced in 1999 was initially approved for five years up to March 2004. It was later extended with modification. Though the Government indicated that the scheme would be available for the entire 11{+t}{+h} Plan period, citing inadequate funds, the Government withdrew the scheme in June last year.

Attracting investments

Industry sources say that TUF had catalysed investments of Rs 2.08 lakh crore during its operational period of over 11 years. Now, with the scheme in place, industry sources perceive that the investments would catch up again. “Though the industry is facing a temporary glut in the market due to uncertainty in cotton and yarn trade policies, it will not be a barrier in attracting investments, the Southern India Mills Association (SIMA) Chairman, Mr J. Thulasidharan, said.

While thanking the Union Textile Minister, Mr Dayanidhi Maran, for his efforts in getting the scheme back, albeit in a restructured form, the SIMA chief appealed for continuity of the scheme. “The 4 per cent interest subsidy for standalone projects and 5 per cent interest subsidy for spinning projects with matching capacity in weaving, knitting, processing/garmenting is a welcome move. The 10 per cent capital subsidy for new shuttleless looms apart from the 5 per cent interest subsidy would attract large-scale investments in the weaving sector,” Mr Thulasidharan said.

He urged the Textiles Ministry to consider the loans sanctioned but not availed before April 27, 2011, and the advance payment made for the machinery before the cut-off date be made eligible under the restructured TUF scheme.

Segment-wise cap

He further requested that the segment-wise cap of 26 per cent for spinning, 13 per cent for weaving, 21 per cent for processing, 8 per cent for garmenting and 32 per cent for others (that too bank-wise) be removed as these caps could become a barrier in attracting investments, leading to a slowdown in the process.

The Tirupur Exporters' Association President, Mr A. Sakthivel, said the continuance of cover for foreign exchange rate fluctuation/forward cover premium not exceeding 5 per cent for knitwear sector would help the industry in Tirupur since fluctuation in foreign currency is not only frequent but abnormal too.

Hailing the measures extended to the SSI sector in opting for 15 per cent margin money subsidy in lieu of the 5 per cent interest reimbursement on investment in TUF compatible specified machinery, he noted that the capital ceiling had been increased from Rs 2 crore to Rs 5 crore and ceiling on margin money subsidy from Rs 15 lakh to Rs 45 lakh.

Pointing to yet another change in the restructured TUF scheme, the SIMA Chairman said the loan repayment period has been reduced to seven from ten years (including the two-year moratorium period). “We are requesting the Government to reconsider its decision and enhance the repayment period to ten years,” he said.

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