Stoppage of TUFS loans shocks textile industry

At a time when the textile industry is gearing up for more investments for capacity expansion and modernisation to tap the export potential, the suspension of the Technology Upgradation Fund Scheme (TUFS) has sent shockwave through the textile entrepreneurs and associations in the region.

"It is shocking to note that when the industry is seeking to extend the TUF Scheme till 2010, a circular has been issued by the office of the textile commissioner, Mumbai, requesting the banks not to sanction any fresh loans under TUFS with effect from July 6, 2006. Though the scheme expires only in March 2007, the stoppage of sanctioning of loans worries the industry," said A Sakthivel, president, Tirupur Exporters' Association.

"As the textile industry is facing tough competition in the international market, capacity expansions are unavoidable. Moreover, we have to take advantage of the situation when the United States of America and the European Union have introduced safety measures on China till 2008," he added.

The TUFS, which was due to close in March 2007, has been able to mobilise about Rs 33,500 crore. Another Rs 20,000 crore investments are likely to come up before March 2007.

"Out of this Rs 33,500 crore, 29 per cent has been advanced to the units in Tamil Nadu. The state occupies top slot in the list of states that have availed a major chunk of bankable funds under the TUFS," according to J N Singh, union textiles commissioner.

The textile industry in Coimbatore region alone has pumped in more than Rs 2,000 crore as new investments in the past two years or so.

This investment is based on the rough estimate of about one million new spindle-equivalent capacity creation seen by the spinning and composite mills in the region, according to sources in the Southern India Mills' Association (SIMA).

Industry sources said that if the ongoing modernisation and expansion projects of companies were stopped midway, there was an impending danger of investors withdrawing from the projects. Therefore, the projects started earlier and are in the pipeline should continue to get loans under the TUFS, they point out.

The associations in the region are planning to appeal to the Union government to withdraw the circular and extend the scheme till 2010.