Working group on textiles favours higher interest reimbursement

Our Economic Bureau

New Delhi, Dec 10: The working group on textile industry, including jute, for the 10th Plan has recommended that the government should follow the Chinese example and allow a higher interest reimbursement at 8 per cent for certain “critical” sectors against 5 per cent allowed under the Technology Upgradation Fund Scheme (TUFS) for achieving global competitiveness. These sectors are processing, knitting, technical textiles and hundred per cent export-oriented units.

The same dispensation may also be considered for those textile units which scrap their obsolete spindles and looms and replace them with modern ones based again on the method adopted by Beijing, the group has said.

The group, headed by the textiles secretary, also recommends that technically and potentially viable mills undergoing restructuring, amalgamation or where rehabilitation package is proposed are also covered by TUFS, subject to approval of the lending agencies.

In regard to technical textiles and processing sector, the moratorium period for reimbursement of loans under TUFS may be raised to three years from two years at present. Under the scheme, loans granted by the designated public financial institutions are to be repaid within a period of ten years with a moratorium of two years. Technical textiles are used for making conveyor belts and for laying roads.

The scheme was introduced for the textile sector, including jute, for a period of five years from April 1, 1999. Units availing of the scheme will be reimbursed interest at 5 per cent lower than the normal lending rate charged by term lending institutions. The objective is to keep the cost of capital low thereby speeding up modernisation.

Moreover, the group wants that the 8 per cent interest subsidy to be extended to the powerloom sector for modernisation on grounds that the weavers belong to the lower economic strata of the society and do not have the wherewithal to invest in technology upgradation.

The working group report further suggests that facilities available under the National Equity Fund (NEF) scheme be combined with TUFS in order to adequately consider requests from powerloom weavers especially in Gujarat and Mahrashtra. Under TUFS, a total 1,152 applications with a project cost of Rs 12,163 crore were received up to May 31, this year. Of those, 953 applications with a total loan amount of Rs 44,588 crore had been sanctioned and Rs 2,673 crore had been disbursed against 700 applications.

The composite mills received the highest amount of Rs 831.81 crore for technology upgradation, followed by the spinning sector with Rs 797.19 crore and processing of fibres, yarns, fabrics, garments and made-ups Rs 456.95 crore.