Importing woes prevail

Imports under TUFS is proving detrimental for the textile industry, as old machines are being imported at a concessional rate of duty.

It is a paradoxical situation for the textile industry as far as the impact of the Technology Upgradation Fund Scheme (TUFS) on the machinery segment of the industry is concerned.

It is an irrefutable fact that the kind of boost this scheme (which provides 5 per cent subsidy on the interest reimbursement charged by financial institutions lending funds to textile firms) brought to one of the oldest industries in the country is indeed unexpected and appreciable.

However, it has its negative effects on the textile engineering sector, which, of course, makes a negligible chunk when compared with the burgeoning size of the textile sector in the country.

Industry sources say that India is becoming a junk-yard for old, second-hand textile machines that are being imported by the country's textile players. The worse part is, import of such old machines is being done at a concessional rate of duty on a large scale with benefits under TUFS.

"Such imports will discourage the efforts of the textile engineering industry when it comes to making investments in the weaving and processing machinery sector," says Rajnikant S Bachkaniwala, chairman, Textile Machinery Manufacturers' Association of India.

In 2005-06, the total imports of textile machinery were to the tune of Rs 7,000 crore. And with demand for machinery and accessories growing fast, it is expected to cross Rs 8,500 crore.

"As far as preventing imports of second-hand machines are concerned, we are in touch with the government, but nothing seems to be materialising," he says. TUFS benefits should not be given to import such machinery as it is detrimental, he adds.

The interesting part is, the size of the domestic textile machinery sector is around Rs 2,500 crore (around one-third of the total import value). The overall installed capacity is Rs 3,800 crore. Industry is targeting Rs 10,000 crore, but the time frame is uncertain. According to Bachkaniwala, it is an uphill task and will not materialise unless the government supports it.

The industry is exporting 20 per cent of its annual production of machines and accessories. "We are strong on front accessories exports, and complete machine exports constitute around 30 per cent of total exports," he says. In 2005-06, exports by the textile engineering industry totalled Rs 482 crore, compared to the previous year's Rs 457 crore.

Rising domestic demand and fierce competition in the international market are the contributing factors for a marginal increase in exports.

SNIPPETS

In limbo
Being part of the ministry of heavy industries, textile machinery manufacturers feel that step-motherly treatment is being meted out to them, and they have been neglected so far.

Despite repeated attempts by the Indian Textile Engineering Industry along with Confederation of Indian Textile Industries (CITI) asking for shifting the industry to the ministry of textiles, nothing seems to be materialising.

"We belong to the ministry of textiles. As there are other heavyweight sectors in the ministry of heavy industries, we are comparatively smaller and so our needs are not appreciated," say industry sources.

They add that as it is an inter-ministerial issue, the government should take initiatives for the welfare of machinery manufacturers. A proposal for a pilot scheme of Rs 47 crore made by the department of heavy industries to the Planning Commission for modernisation, business development, technology partner search for productivity, quality improvement and R&D testing through clusters has not come yet. "It is essential to remove such impediments at the earliest to strengthen the industry's competitiveness," says Bachkaniwala.

Foreign guests
The textile machinery sector has floated the idea of inviting foreign firms to set up plants and use India as an exporting hub. It flashed up in the recently concluded 16th annual session of Federation of Indian Textile Engineering Industry.

"If the auto sector can do the same and flourish in the country, why are foreign players not invited in the textile machinery sector too?" asks R L Toshniwal, chairman and managing director, Banswara Syntex.

"Because of the anomalies in the government's policies, foreign manufacturers are not setting up their plants here. Once they come, they too would face the same brunt that we have been facing as far as the taxes are concerned," says Bachkaniwala.

However, he supports the idea of making India an exporting hub for textile machinery. Toshniwal says that Indian textile machinery manufacturers should set up plants in the upcoming SEZs.