Technology upgradation fund scheme aims at boosting investment in textile sector
A panel of secretaries will meet on Tuesday to consider the structure of the technology upgradation fund scheme (TUFS) for the current Plan period, aimed at boosting investment in the textile sector, a senior government official said on Thursday.
After the clearance from the committee, the structure of the scheme is expected to be placed before the Cabinet Committee on Economic Affairs in about three weeks, the official told FE.
The Budget 2013-14 announced the continuation of the TUFS during the 12th Plan period through 2017 with a subsidy allocation of R11,952 crore. The government expects to attract investments worth R1,51,000 crore in the textile sector through the scheme during the current Plan period.
According to official data, the government catalysed investements worth R1,11,000 crore in the textile sector in the three years through 2011-12 by offering a subsidy of R9,000 crore under the TUFS.
The government mainly provides interest subsidy against loans to units, capital subsidy and limited cushion against exchange rate fluctuation for investing in new technology.
The TUFS has leveraged investments of R2,43,721 crore since April 1999 when it was introduced to make available funds to the the textile industry for upgrading technology at existing units as well as to set up new units with state-of-the-art facilities so that its viability and competitiveness in the domestic as well as international markets would enhance.
Despite a cash crunch in the overall industry, the country’s spinning capacity rose by 6.11 million spindles to 48.15 million spindles in the three years through 2011-12, partly due to the help provided under the scheme, the data showed. Consequently, the employment in the spinning sector also increased to 9,44,000 in 2011-12 from 8,92,000 three year before.
However, the government has been planning to tweak the TUFS to shift focus from the spinning segment to the more labour-intensive processing, weaving and garments sectors, aimed at boosting inclusive growth, according to official sources.
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 capital-intensive spinning sector traditionally accounts for around a half of the total committed investments under the TUFS and grabs 50% of the government’s subsidy allocation.
