Even though, the government had extended a stimulus package for textile industry in December, the backlogs in disbursements of Technology Upgradation Fund Scheme (TUFs) assistance have still been piling up.
?The backlogs amounting to Rs 1,800 crore are still pending and by June 2009, these are expected to shoot up to Rs 2,500 crore?? industry sources told FE.
The government had made a provision of Rs 1,400 crore under the relief package in December which could only meet capital requirements of the textile companies up to June 2008. By March 2009, the arrears have gone upto Rs 1,800 crore.
The financial year is almost over and disbursements for most of the units for the six months are still pending. There are also complaints of delay in payments of export benefits, the sources added.
Because of the forthcoming Lok Sabha polls , no allocations under the scheme will be made before June 2009, disbursements will be made by the next regime, it is estimated the arrears will touch a level of Rs 2500 crore.
Keeping this view, the textile companies have cut their production targets by 40 per cent. ?With the result investments in the textile and clothing industry have virtually come to a stand still upsetting the expansion and modernization plans of both textile and machinery industries?? the secretary general of Confederation of Indian Textile Industry (CITI), DK Nair said.
To encourage investment in textile sector, TUFS was introduced by government in April 1999, an interest subsidy of 5% is given to manufacturers.
Subsequently, the scheme also provides an upfront capital subsidy of 20% for decentralized weaving units as an alternative to 5% interest compensation for specified processing machines and a 10% capital subsidy.
During 2008-09, the government made a provision of Rs 1090 crore under the scheme, however, in interim budget no provision was made under TUFS.
In 2007-08, the textile companies made an investment of Rs 19917 crore under the initiative.
During 2008-09 upto December, the investments to the tune of Rs 20,000 crore were made.
