Technology upgradation fund scheme for textile growth

The Indian Textile Industry has an overwhelming presence in the economic life of the country. Apart from providing one of the basic necessities of life, the textile industry also plays a pivotal role through its contribution to industrial output, employment generation, and the export earnings of the country. Currently, it contributes about 14 percent to industrial production, 4 percent to the GDP, and 17 percent to the country s export earnings. It provides direct employment to about 35 million people,which includes a substantial number of SC/ST, and women. The Textile sector is the second largest provider of employment after agriculture. Thus, the growth and all round development of this industry has a direct bearing on the improvement of the economy of the nation. The Indian textile industry is extremely varied, with the hand-spun and hand woven sector at one end of the spectrum, and the capital intensive, sophisticated mill sector at the other.The decentralized power loom/ hosiery and knitting sectors form the largest section of the Textile Sector. The close linkage of the Industry to agriculture and the ancient culture and traditions of the country make the Indian textile sector unique in comparison with the textile industry of other countries. This also provides the industry with the capacity to produce a variety of products suitable to the different market segments, both within and outside the country.

The major sectors forming part of the textile industry include the organized Cotton/Man-Made Fibre Textile Mill Industry, Wool and Woolen Textile Industry, Sericulture and Silk Textile Industry, Handloom Industry, Handicraft Industry, Jute and Jute Textile Industry, and Textile Exports. The Ministry of Textiles is implementing various schemes for the holistic growth and development of the sector.

The Indian Textile Industry has suffered from severe technology obsolescence and lack of economies of scale, which in turn diluted its productivity, quality and cost effectiveness, despite distinctive advantages in raw material, knowledge base, and skilled human resources. While the relatively high cost of state-of-the-art technology and structural anomalies in the industry have been major contributory factors, perhaps the single most important factor inhibiting technology up gradation has been the high cost of capital, especially for an industry that is squeezed for margins.Given the significance of this industry to the overall health of the Indian economy, its employment potential and the huge backlog of technology upgradation, it has been felt that in order to sustain and improve its competitiveness and overall long term viability, it is essential that the textile industry has access to timely and adequate capital, at internationally comparable rates of interest in order to upgrade the level of its technology.

In the light of above, the Technology Upgradation FundScheme was launched on 01.04.1999 for a period of five years, which has been subsequently extended till 31.03.2007, the terminal year of the X^th plan.

TUF Scheme will be continued during the eleventh plan against a provision of Rs.535 Crore in 2006-2007. Rs.911 crore would be provided under TUF Scheme in 2007-2008. As before handlooms will be covered under the TUF Scheme. The extension of TUF, a central scheme offers 5% interest subsidy to textile companies on expansion spree, has been high on the wish list of the industry. It wants more incentives for investment as it aims to double its global market to 10% by 2010. For this,investments worth Rs. 100,000 crore are required. The Union Budget 2007-08 has been positive for the textile sector.

TUF Scheme will be continued during the eleventh plan against a provision of Rs. 535 Crore in 2006-07. Rs. 911 Crore would be provided under TUF scheme in 2007-08.

As before handlooms will be covered under the TUF scheme.Allocation under this scheme for the next year has been increased which should expedite the release of the subsidy.

EXTENDED

The Textile Ministry recently decided to extend the Technology Upgradation Fund (TUF) scheme to boost the textile industry.The industry has begged the extension of the 10% upfront capital subsidy for specified textile processing machinery by another year. The subsidy is additional to the interest subsidy of 5% under the TUF for specified textile processing machinery and the implementation period for the scheme is one year.Which will end on April 19, 2006.Under the scheme, the government has yet sanctioned 4,047 applications worth Rs 12,758 crore for expansion projects worth Rs 28,628 crore. The largest number of applications for funding has come from Gujarat (1,214).Tamilnadu got around 1,174 applications and Maharashtra 317.

In the industry, processing remains the weak link in the production chain and industry players feel that the industry needs more time to gear up to meet the need of the post-quota setting. The extension of the scheme would benefit a lot of such textile processing units that have not avail the savor if it. Also, TUF would greatly help the textile industry to face global competition.

The latest data available with the Textile Commissioner, textile units have picked up nearly Rs 12,758 crore over the last three years under the government of India's Technology Upgradation Fund Scheme (TUF) which would see an addition of six million spindles and 30,000 shuttle looms this year.

The Textile Minister, Shankersinh Vaghela is of the view that the domestic and apparel industry would be the next Indian software industry, offering international quality products and services. The ministry of textile is also hopeful that the extended scheme will assist some more quality standards on the international platform. The industry people has welcomed the extension and it is assumed that Indian apparel exports are slated to grow at 15-18% annually and win 5% of the global apparel export market till 2010.

Definition of Technology Upgradation

Technology upgradation would ordinarily mean induction of state-of-the-art or near-state-of-the-art technology. But in the widely varying mosaic of technology in the Indian textile industry, even a significant step up from the present technology level to a substantially higher one for such trailing segments would be essential. Accordingly, technology levels are benchmarked in terms of specified machinery for each sector of the textile industry. Machinery with technology levels lower than that specified will not be permitted for funding under the TUF Scheme.

Benefits under the scheme:

• 5% reimbursement of the normal interest charged by the lending agency on rupee term loan (RTL); or
• Coverage of 5% exchange fluctuation (interest & repayment) from the base rate on foreign currency loan (FCL); or
• 15% credit linked capital subsidy for the SSI textile and jute sector; or
• 20% credit linked capital subsidy for the power loom sector; or
• 5% interest reimbursement, plus 10% capital subsidy, for specified processing machinery.
• 25% capital subsidy on purchase of the new machinery and equipment for pre-loom & post-loom operations, handlooms/up-gradation of handlooms and testing &quality control equipments, for handloom production units.

Eligibility criteria:

Technology levels are bench marked in terms of specified machinery. There is no cap on funding under the scheme.

The following are covered under the scheme:

a) Cotton ginning & pressing.

b) Textile industry covering:-

•     Spinning;

•     Silk reeling & twisting;

•     Wool scouring & combing;

•     Synthetic filament yarn texturising,

•     crimping and twisting;

•     Viscose filament yarn (VFY);

•     Weaving/knitting including non-wovens,

•     fabric embroidery and technical textiles;

•     Garments, made-up manufacturing;

•     Processing of fibers, yarns, fabrics,

•     garments, and made-ups;

c) Jute industry.

The Industrial Development Bank of India (IDBI), the Small Industries Development Bank of India (SIDBI), and the Industrial Finance Corporation of India Ltd. (IFCI) are the nodal agencies for the Non-SSI textile sector, SSI textile sector and Jute sector, respectively. However, in 2005, 13 additional nodal banks have also been appointed under TUFS for determining eligibility & releasing subsidy for cases financed by them.

Monitoring and Review of the Scheme:

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