The textile industry is upset over the suspension of subsidyfor new projects under the technology up-gradation fund (TUF) scheme.


A textile analyst feel, TUF scheme is necessary to further augment spinning,processing, weaving and garmenting capacities by utilising the advantage ofsurplus cotton in India.


The office of the textiles commissioner in its circular dated June 30 askednodal agencies/ banks not to issue new sanctions till additional funds areapproved by the Cabinet committee on economic affairs (CCEA) and lendingagencies.


While Textile Ministry sources say the scheme is being re worked and it willtake two to three months time to lift the suspension, the garment manufacturersare worried on the implication of the notice. "We are shifting fromproducing cotton-based garments to manmade-fibre garments.


We need to purchase warp-knitting machinery and new technologies forprocessing. It requires huge investment and if the TUF scheme is stopped thenit will be a big problem for us," said Tirupur Exporters Associationpresident A Sakthivel. Since 2008, due to global recession, the exporters hadshelved their proposals to go in for modernisation and capacity augmentation.


"We have now decided to revive expansion as technology up-gradation fundscheme would be available only till 2012," Mr Sakthivel added. Tirupurexporters have so far utilised only around Rs 3000 crore under TUF scheme. TheTUF scheme introduced in 1999 has substantially benefitted the textile industryand it proved and a very successful and effective scheme for expansion andmodernisation.


The spinning sector in the country alone has used 34% of the total amountsanctioned. The Southern India Mills Association (Sima) statistics point outthat off the Rs 73,167 crore sanctioned under TUF scheme, spinning mills alonehave used Rs 24,949 crore for technology up-gradation.


"We had very slow pick-up in using the fund till 2003. After 2007 March,when the TUF scheme was continued in the 11th plan, we couldnt utilise muchfunds due to the poor performance of the industry in the last two years.


Now, we have again started new projects and this scheme is very crucial for theindustry," said Sima secretary general K Selvaraju.


The Confederation of Textile Industry (Citi) secretary general D K Nair hopedthe recent move by the government is only a temporary measure. The total fund(Rs 8000 crore) allocated under TUF scheme in the 11th five year plan has beenused up completely as the investment was huge in the last three years.

So, the textile ministry has gone to CCEA for enhancing allocation. Mr Nairsaid it is important to ensure that sanction for fresh projects is resumedquickly as any uncertainty will create confusion in the the industry. "Asa fiscal measure, if they need to curtail total outflow, they may slightlyreduce the percentage of subsidy instead of fully deferring it or canceling thescheme," added a textile analyst.


Sima chairman J Thulasidharan said the scheme should be continued during the12th five-year plan too as textiles is a capital intensive industry.



Originallypublished in The Economic Times: 2nd July 2010