Relaunched tech upgrade scheme for sector gets applications from just 50 investors.
After an overwhelming response in the 11 years of its first life, the Technology Upgradation Fund Scheme (Tufs) for the textile sector has failed to cheer investors in the first three months of re-launch.
The scheme has received applications from only 50 investors for new projects worth Rs 2,000 crore. Even if all applications are approved, these would see disbursal of a paltry Rs 100 crore of the total allocation of Rs 1,972 crore.
“The response is very poor, much below our expectations. We have started conducting roadshows in various textile centres to make investors aware of the benefits. Recently, we oganised two roadshows, each one on Ludhiana and Surat. Another two, one in Hyderabad and another in Coimbatore, are planned soon,” said A B Joshi, commissioner in the Union textiles ministry.
Tufs, a subsidy scheme, was introduced in 1999 to catalyse investments in all sub-sectors of the textiles and jute industry, by way of five per cent interest reimbursement. The scheme was initially approved from April 1999 to March 31, 2004. Subsequently, it was extended, in 2004 and again in 2007, with modifications. The scheme was discontinued on June 28 last year. Crisil’s research revealed Tufs facilitated an increase in productivity, in cost and waste reduction, and improved quality across the value chain. However, the gains made have varied across segments, with the processing and powerloom sectors emerging as areas of concern. To ensure optimum value addition across the chain, the evaluation study recommended Tufs be restructured to channelise investments towards hitherto low-focus areas.
Investments under Tufs had gained notable momentum in its last three years. Since its inception, the government released a total subsidy of Rs 11,196 crore, of which Rs 8,883 crore was disbursed in the last three years. Tufs is estimated to have catalysed investments of Rs 2,08,000 crore during those 11 years.
Lured by these findings, the government re-introduced the subsidy under Tufs to new investors in totally downstream sectors on April 28 this year. Unlike the earlier open-ended scheme, the restructured one closes on March 31, 2012.
Joshi said the restructured guidelines may not have been understood properly and hoped for a speedy recovery in applications.
In analysisng the tardy response, it is thought that besides making the guidelines tougher, the government’s 11-month duration was inadequate for a small textile player. For example, the scheme this time is restricted to cover only automatic shuttleless looms of 10 years’ vintage and with a residual life of a minimum of 10 years. The value cap of automatic shuttleless looms will be decided by the Technical Advisory-cum-Monitoring Committee.
Amit Ruparel, chairman of The Cotton Textiles Export Promotion Council, attributed the poor response to global slowdown in the sector. “Besides, the short period of its validity is another constraint preventing investors to take benefit of the scheme. We may not be able to utilise the overall fund this time, but the situation might catch in a month,” he added.
Arun Dalal, a veteran Ahmedabad-based cotton trader, called it a flop scheme since the government had already hit the textile industry with higher excise and value added tax in the last budget.
