The Union ministry of textiles has recommended that the Technology Upgradation Fund Scheme (Tufs) should be extended for five years. It has also proposed to the finance ministry and the Planning Commission to make it a part of the 12th Five-Year Plan beginning April 2012.
“The suggestion has been put forward for approval to the steering group in the Planning Commission, for including Tufs in the 12th Five-Year Plan,” said V Srinivas, joint secretary, textiles ministry.
Industry experts believe subsidy may be reduced to four per cent from the current five per cent except for garmenting and weaving which would receive five per cent subsidy.
Tufs, suspended in June last year, was reintroduced this April, with an addition of Rs 1,972 crore for one year and the scheme is to end on March 31.
However, this year the response has been weak due to the slowdown in the Indian market. Terming the response lukewarm, A B Joshi, textile commissioner, said, “We have received proposals of Rs 110 crore for allocation, for the Rs 4,200-crore project.”
Tufs was first introduced in 1999 and got a very encouraging response. The total subsidy released was Rs 11,200 crore, of which Rs 8,883 crore was issued in the last three years. Tufs is estimated to have catalysed investments worth Rs 2,08,000 crore, during its 11-year life.
Expansion projects have been put on hold and the response has been poor. Also, demand from international markets is limited due to the current euro zone crisis and the economic uncertainties in the US, which has also affected the industry, as these are the major markets for Indian textile exporters.
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This year, the textile industry has been affected drastically due to the high volatility in cotton prices. In October, the Centre decided to allow duty-free import of 48 textile items from Bangladesh. So, rather than expanding the garment business in India, apparel manufacturers are moving to Bangladesh and exporting garments to India.
In the modified Tufs, the loan repayment has been reduced to seven years from 10 years earlier. The moratorium period remains two years and the loan-repayment period has been reduced to five years from seven years.
Earlier, only the garment and processing sector enjoyed 10 per cent subsidy. The weaving sector in the new scheme has been granted 10 per cent capital subsidy for new shuttle-less looms, to get rid of second-hand ones. However, the spinning sector’s interest reimbursement has been reduced to four per cent from the earlier five per cent.