Lack of funds, weak dollar put expansion on hold

TEXTILE IN TATTERS

Delays in disbursement of funds under the Technology Upgradation Funds Scheme (TUFS) for the textile sector as well as a strong rupee have led many textile companies to put their expansion plans on hold.

Manufacturers of textile machines are reporting a decline in orders for new machines over the past few months.

Sudhir Dingra, chairman, Orient Craft, said, "We had planned to invest Rs 70-80 crore for a new facility in Gurgaon, but we have put our plans on hold for a year. This unit would have provided jobs to 3,000-4,000 people."

Unable to sustain the pressure due to the strong rupee, the company has let off around 3,000 employees, mostly contract workers, over the last four months.

Other companies, which have facilities overseas, are now planning to expand not in India but in countries like Bangladesh, Pakistan, Vietnam and Indonesia.

House of Pearl Fashions Ltd, a ready-to-wear apparel company, today informed the Bombay Stock Exchange about its plan to relocate its facilities. "We will be expanding in Bangladesh and Vietnam, where labour is cheaper and efficient," said Deepak Seth, chairman and managing director of the company.

TUFS was launched by the textiles ministry in March, 1999 for a period of five years. It was subsequently extended up to March 31, 2007, the end of 10th Five Year Plan (2002-07). Under the scheme, textile companies get loans at five per cent interest rate.

The scheme has been extended into the 11th Plan period and is also set to be revised. "A proposal has been submitted to the Cabinet and it is expected to cleared soon," government sources said.

Concerned about the plight of the sector, Prime Minister Manmohan Singh has asked C Rangarajan, the chairman of his economic advisory committee, to study the situation and give a presentation on the issue.

In 2006-07, the cost of projects sanctioned under TUFS was around Rs 35,651 crore.

Agreeing that the year has been bad as far as investments in the industry is concerned, Textile Commissioner J N Singh said, "It is a difficult phase for the textile industry, which is facing challenge and newer opportunities."

Confederation of Indian Textile Industry Secretary General D K Nair said, "Due to the decline in exports of yarns and fabric, the stock has got pilled up and as a result of that companies have not lifted the machine orders placed by them six months back."

Most companies have not placed fresh orders for textile machines, thus resulting in 10-15 per cent decline in our order book," Gurudas Aras, President (Textile Engineering Group), ATE Group.