The Cabinet Committee on Economic Affairs (CCEA) is slated to consider a proposal tomorrow to increase the total fund sanction for modernisation of the textiles industry in the XI Five-Year Plan to Rs 15,000 crore.
The government had earlier earmarked Rs 8,000 crore for this purpose, which was exhausted by June last year. Subsequently, the government had asked banks to suspend new sanctions under the technology upgradation fund scheme (TUFS) till allocation of additional funds was approved by the CCEA.
The additional funds proposed to be allocated for TUFS will be utilised for payment of existing commitments worth about Rs 5,432 crore, besides new initiatives worth Rs 1,972 crore, during the remaining months of the XI Plan (2007-12).
The Textiles Ministry has indicated that the additional funds proposed to be sanctioned for new initiatives under TUFS will not be open-ended and will be capped at Rs 1,972 crore.
Banks and financial institutions have disbursed loans worth Rs 73,168 crore since TUFS was introduced in 1999. In order to promote modernisation of textiles units in the country, the government subsidises 5 per cent of interest payments on loans sanctioned under the scheme.
The $63 billion Indian textiles industry has been demanding continuation of the scheme, as the freeze would adversely impact their investment and modernisation plans.
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The ministry said segments like spinning, cotton ginning and pressing, garments and weaving are among the major beneficiaries of the scheme.
The textiles industry, which provides employment to about 35 million people, requires constant modernisation of plants and machinery to remain competitive in global markets against rivals like China, Bangladesh and Sri Lanka.