Textile sector gets Rs 7,400 crore funds for technology upgradation

In a move that will help boost the prospects of Indian textile players in an increasingly competitive global export market, the government has on Tuesday increased the allocation for modernization of the textiles industry to Rs 15,404 crore from earlier sanction of Rs 8,000 crore to be disbursed within the current Five Year Plan ending March 2012.

Not only has it increased the allocation for the Technology Upgradation Fund Scheme (TUFS) but has also restructured the same to make it more effective. A wider gamut of players and particularly the smaller players will be able to get greater benefit and improve their scale of operations from the revised and restructured scheme according to the textile ministry. A decision to this effect was cleared by the Cabinet Committee on Economic Affairs (CCEA) on Tuesday.

As per the restructured scheme, out of the fresh allocation a total of Rs 1972 crore would be available for fresh sanctions while the remaining Rs 5,432 crore will be utilized for meeting the already made commitments. Following the meeting of the CCEA, textile ministry stated that the approval from Cabinet will enable immediate lifting of the pause button imposed on the scheme by it since June 29, 2010. The scheme was put on hold last year following lack of funds.

According to the textile players, one way through which the restructuring will improve the reach of the scheme is the fact that capital ceiling under the margin money has been raised and this would encourage the weaving sector to go in for more number of looms and thus would also boost large-scale investments as well. So far, most of the investments were into second-hand looms.

TUFS was launched in 2007-08 to help the industry upgrade to advanced technology in order to improve competitiveness against other exporting countries.  The scheme mainly provides for reimbursement of 5% interest charged by the financial institutions/banks for technology upgradation projects in conformity with the policy. In case of overseas loans, it gives the option of availing a cover for exchange rate erosion of up to 5% per annum instead of 5% interest support. As per the changes made in the scheme the government under the re-structured scheme, 10% capital sops would also be provided on brand new looms.