Weaving is no longer a TUF task

BUDGET & BUSINESS

Budget proposes reduction in the customs duty on polyester fibre and yarn from 10 per cent to 7.5 per cent.

THE MEASURES
Putting textiles in sharp focus, the Union Budget has proposed a 124 per cent increase in the fund allotted to integrated textiles parks, continuation of the technology upgradation fund (TUF) for another five years with more funds and a reduction in the customs duty on polyester fibre and yarn from 10 per cent to 7.5 per cent.

The finance minister has further sweetened the offer by announcing that more weavers would be brought under the health insurance scheme.

THE CONTEXT
The extension of TUF, a central scheme that offers 5 per cent 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 per cent by 2010. For this, investments worth Rs 100,000 crore are required.

Integrated parks provide common infrastructure for a cluster of handlooms. So the industry has been asking for more funds for them.

The announcement of extension of the health insurance scheme to more weavers came as a pleasant surprise. The scheme so far covered 300,000 weavers.

THE IMPACT
The most important of these measures is the extension of TUF, which was slated to end on March 31, 2007. The finance minister has also proposed to provide Rs 911 crore in 2007-08 to the fund, compared with Rs 535 crore the previous year. Introduced eight years ago for textile and jute industries, the scheme has received Rs 236 crore for textile units as of December 2006.

Alok Industries managing director Dilip Jiwrajka said the proposals pertaining to TUF would encourage the companies to invest more.

"Although the fund was launched in 1999, the industry started receiving the advantage of the fund only in the last two years. So, it should continue for some more years to help the industry carve a bigger pie of the world textiles market," he said.

Raymond India chairman and managing director Gautam H Singhania said: "The Budget should expedite the release of the subsidy... boost the setting up of additional capacities."

Jiwrajka, however, said the benefits of the budget would get reflected more in textile companies' share prices had there been no dividend distribution tax increase.