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TUF scheme: how much does it benefit textile industries?
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The Indian textile industry occupies a unique position in the economy of the country in terms of production, exports, and employment. It is duly supported by state of the art technology and structural glitch in the industry. Despite its strength in production base, availability of raw material, and labor, the industry suffers from lack of economies of scale and technological obsolescence. The overall potential of the industry and the backlog of technological up gradation in context of industrial liberalization and globalization are emphasized by industry analysts to enhance its competitiveness and long term viability to upgrade itself. It was therefore felt essential to make an operational and profitable Technology Upgradation Fund (TUF) scheme to provide modernization and technology upgradation in the industry.

 

Textile industry consists of major sectors such as Cotton/Manmade Fibre Textile Mill Industry, Handloom industry, Jute Textile Industry, Wool, and Woolen Industry, Handicrafts, and Textile exports industry. TUFS was initially launched on 1999 for a 5 year period, and was extended by the Ministry of Textiles for the 11th Five Year Plan (2007-2011) to boost the industry. Under this scheme, certain identified sectors of textile industry are eligible for concessional loans regarding technology up gradation requirements. Technology levels are benchmarked in specific terms for each sector of the industry. Machinery and technology levels that are lesser than the specified benchmark are not qualified for funding under the TUF scheme. The extended scheme will revive the modernization that has been carried out during the last few years.

 

While the Government has formulated the TUF scheme with the intention of aiding modernization in the textile industry, availability of cheap finance has led to expansion of the industrial capacity of the existing mills on a large scale, and has invited the entry of new players. Analysts predict that 2009 will not be a profitable year as much focus is required on aspects like global economy, and power cuts. Prices of raw cotton and yarn are also expected to be crucial.

 

Any industry should be market based, and must have the ability to generate revenues so as to repay the investment. With TUF, low cost capital has become the sole motivator for existing businesses to expand, and new businesses to enter in the arena. A textile unit needs maximum working capital right from spinning to garment making. Spinning mills depend on the availability of raw cotton at the right price. TUF only takes care of financing regarding the fixed assets. The issues of arranging for finance to meet the working capital requirements are still left in the company's own accord.

 

Indian textile industry has an overwhelming presence in the country's economic perspective. With TUF many entrepreneurs saw the option for cheap availability of finance but they tend to forget the vagaries of the market, and tinge of cotton purchasing. Revival of the global economy from the financial crisis, alternatives for crippling power cuts and an improvement in the yarn and cotton prices will bring about a positive change in the performance of the industry. But with all these constraints, the industry is foreseeing a slightly gloomy year ahead.

 

References:

 

  1. http://www.txcindia.com
  2. http://www.nmcc-vikas.gov.in
  3. http://www.thehindubusinessline.com

 

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Published On Tuesday, May 12, 2009
 
 
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