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  1. Govt OKs Amended TUF Scheme for textile sector

Govt OKs Amended TUF Scheme for textile sector

Allocates Rs 17,822 cr to clear pending claims as well as roll out the scheme

By: | New Delhi | Published: December 31, 2015 1:14 AM

The government on Wednesday decided to introduce the Amended  Technology Upgradation Fund Scheme (ATUFS) for the textile and garment sector and approved a total allocation of Rs 17,822 crore to clear pending claims as well as roll out the new scheme.

Textile secretary Sanjay Kumar Panda told FE the Cabinet Committee on Economic Affairs also ended the interest subsidy being provided for investments made under the extant TUFS and decided to provide only the capital subsidy. FE was the first to report on October 8 that the government could end interest subsidy under the TUFS, as it intends to rationalise various dole-out-based schemes.

Of the total outlay approved by the CCEA, Rs 12,671 crore would be used for clearing pending claims under the current TUFS, while another Rs 5,151 crore has been allocated for subsidy payment under the new scheme over a period of seven years, Panda said. The amended scheme would give a boost to “Make in India” in the textiles sector and is expected to attract investment to the tune of Rs 1 lakh crore and create over three million additional jobs over a period of seven years, added Panda, who has been instrumental in clearing up subsidy claims pending for years now.

Noted textile expert DK Nair said: “It’s a welcome change in the sense it brings clarity and predictability to the scheme. It will also be easy to implement ATUFS, as various forms of support have been replaced by just capital subsidy, which will be in the form of a one-time support. However, the support under the scheme appears to have been scaled down now, which may take some shine off it.”

Under the new scheme, there will be two broad categories: apparel, garment and technical textiles segments will be provided 15% subsidy on capital investment, subject to a ceiling of Rs 30 crore rupees for entrepreneurs over a period of five years; remaining sub-sectors would be eligible for capital subsidy at a rate of 10%, subject to a ceiling of Rs 20 crore on similar lines.

Currently, the government provides interest subsidy up to 6%, capital subsidy up to 30% in the form of a grant and support under the margin money scheme (another form of capital subsidy) for investments under the TUFS, depending on the segment in which investments have been made. The government has already trimmed Budget allocation for subsidy payment under the TUFS to Rs 1,521 crore for 2015-16, compared with Rs 1,864 a year before.

The move to end interest subsidy is a part of the government’s efforts to remove various interest subsidies across sectors to curb their distorting effect on the interest rate market. RBI governor Raghuram Rajan had been warning that broad-based interest subsidies and loan waivers lead to the distortions of credit price and that “distorted prices lead to the wrong kind of investments” and the misuse of schemes.

“All cases pending with the Office of Textile Commissioner which are complete in all respects, shall be provided assistance under the ongoing scheme and the new scheme will be given prospective effect,” it added.

Gr3

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