Textile mills, hamstrung by a cash crunch and poor demand, have been awaiting the release of subsidies worth Rs 2,500-3,000 crore...
Textile mills, hamstrung by a cash crunch and poor demand, have been awaiting the release of subsidies worth Rs 2,500-3,000 crore for more than three years now against investments made under the Technology Upgradation Fund Scheme (TUFS).
The amount is due because of non-payment of subsidies against investments made by textile units during the so-called black-out period (June 20, 2010 to April 27, 2011) as well as errors in reporting of the dole-out amount by banks to the textile commissioner, sources told FE.
The black-out period refers to the time when the government had halted subsidy payment temporarily, seeking to change the contours of the TUFS from an open-ended scheme to a close-ended one and announced the introduction of the revised scheme only from April 2011.
To look into the issue, the government has set up an inter-ministerial steering committee, headed by textile minister Santosh Kumar Gangwar, which will soon finalise a consultant to accurately calculate the subsidy amount to be paid, although mills estimate the subsidy dues to be a maximum of Rs 3,000 crore. Once the consultant submits its report, the panel will consider it before placing a final proposal for the clearance by the Cabinet Committee on Economic Affairs.
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 was introduced in 1999 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.
The government targeted to attract investments worth Rs 1,51,000 crore through the scheme during the current Plan period.
Budget 2013-14 had announced the continuation of the TUFS during the 12th Plan period through 2017 with a subsidy allocation of Rs 11,952 crore.
After a 33% spurt in the last fiscal, India’s cotton yarn export registration started tumbling below the 100 million-kg mark from April 2014, as Chinese demand faltered. Since the capital-intensive spinning segment accounts for the bulk of investments under TUFS, the non-payment of subsidy amount for earlier investments is taking a toll on the balance sheets of spinning mills.