The government is set to disburse Rs 300 crore within 10 days to clear the backlog of reimbursements to the textile industry under the Technology Upgradation Fund Scheme (TUFS).
The global financial sector crisis has badly hit the Indian textile industry and while the money will help to some extent, textile industry executives say Rs 300 crore is grossly insufficient. The backlog of pending payments under TUFS is over Rs 2,000 crore, they say.
Of the Rs 300 crore, over Rs 100 crore will be for clearing pending claims up to September 2007. The remaining funds will meet pending claims for another two months only, says an industry executive.
“Over Rs 2,000 crore is pending with the government by way of TUFS assistance, which has not yet been released for the period beyond September 2007,” said RK Dalmia, chairman, the Confederation of Indian Textile Industry (CITI). Dalmia urged the government to make an additional provision of Rs 2,000 crore immediately for TUFS for the current year so that the backlog of 2007-08 and the current year could be cleared.
Refuting the industry’s claims, a senior textile ministry official said the release of Rs 300 crore would clear the backlog till December 2007 and the backlog of about Rs 1,400 crore (not Rs 2,000 crore as claimed by the industry) for the four quarters for 2008 would be cleared as and when the ministry got funds from the finance ministry. “If we had the money we would have cleared the dues by now,” the official added.
The delay in disbursement of TUFS assistance has contributed substantially to the current working capital problems of the textile and clothing industry. “The government should either provide sufficient funds immediately or give loans against pending TUFS claims at nominal interest,” said VK Ladia, chairman of CITI’s sub-committee on investments.
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Since TUFS is demand-driven, it became popular in the wake of the dismantling of the multi-fibre agreement regime in 2004 and many textile companies went in for modernisation. It helped create economies of scale and increased the flow of investment in this sector. According to ministry sources, Rs 1,200 crore to Rs 1,400 crore are needed to clear the backlog of proposals under the scheme by March 2009.
The scheme was introduced in 1999 and modified last year. It provides 5 per cent interest reimbursement plus 10 per cent capital subsidy for specified machinery required in manufacturing technical textiles as well as garmenting machinery.
Similar benefits are provided for specified processing machinery. Technology levels are benchmarked in terms of specified machinery. There is no cap on funding under the scheme.