The Centre is considering tweaking the Textile Upgradation Fund Scheme (TUFS) to shift focus from the spinning segment to more labour-intensive processing, weaving and garments sectors, for boosting inclusive growth, an official said on Tuesday.
“Under the proposed structure, the allocation to the spinning sector under the TUFS would be capped at 30%, while for others the sectoral caps are not required. This is because investments in sectors other than spinning have been meagre,” the official told FE.
?Disallowing standalone investment (under TUFS) in spinning is also necessary to correct the current skew in disbursement (of subsidy under TUFS),” he added.
An empowered finance committee is studying the recommendations of the textile ministry, he said. Once cleared by the committee, a Cabinet note for this purpose is expected to be circulated by end-February for approval, he added.
The capital-intensive spinning sector traditionally accounts for around half of the total committed investments under the TUFS and grabs 50% of the government’s subsidy allocation.
Under the TUFS, the government has allocated R11,577 crore for the 12th Plan period (2012-17) to meet the subsidy burden. The government mainly provides interest subsidy against loans to units, apart from capital subsidy as well as limited cushion against exchange rate fluctuation, for investing in new technology.
The proposal to shift focus to the weaving, processing and garments sectors comes amid mounting concerns about the ability of these labour-intensive segments, which mainly comprise small and medium-sized units, to compete on a global level, especially against top player China due to the lack of a massive scale.
Moreover, since these sectors employ millions, they are a crucial driver of inclusive growth and hence needs support.
TUFS was introduced in 1999 to promote the use of sophisticated technology in the textiles and garments sector.
The scheme aims at making available funds to the textile industry for upgrading technology at existing units as well as to set up new units with state-of-the-art technology so that its viability and competitiveness in the domestic as well as international markets would enhance.