Textile sector needs much more than just TUFS

The cabinet on Thursday approved the restructured Technology Upgradation Fund Scheme...

The cabinet on Thursday approved the restructured Technology Upgradation Fund Scheme (TUFS), whose discontinuation during this fiscal had a major impact on investments. But the new scheme, which will now be in force for the entire Eleventh Five Year plan (2007-12), will not provide any relief to rupee-hit exporters who are battling for survival.

The new scheme retains the provision for 5 per cent interest reimbursement for all sectors barring spinning which gets a 4 per cent reimbursement. The provision to purchase second-hand machinery for shuttleless looms has also been retained while margin money subsidy for powerloom and SSI and a 10 per cent capital subsidy for technical textiles and garments has been brought in.

TUFS which has been instrumental in facilitating investments during the Tenth Five Year Plan (see table) lapsed in March this year and was kept in abeyance till now. The discontinuation seems to have cost the industry dearly and the momentum is lost.

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“TUFS provides incentives for fresh investments but this will not specifically benefit the exporters who have been hit hard by rupee appreciation,” said Confederation of Indian Textile Industries secretary general D K Nair. “Right now, exporters are battling for survival and nobody is thinking of expanding.”

Even as neighbouring currencies have remained static, the Indian rupee has appreciated steeply with respect to the dollar in last one year. While rupee is up 13.55 per cent since October 2006, Chinese yuan has appreciated 5.03 per cent, Pakistan rupee remained static and Bangladesh takka has depreciated by 1.28 per cent.

What TUFS provides:

•4% interest reimbursement for spinning machinery, 5% for other sectors.

•Margin money subsidy at 20% for powerloom units, 15% for SSI and jute sector for TUF compatible machinery.

•10% capital subsidy in addition to 5% interest reimbursement for machineries required to manufacture textiles and garments.

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“Our exports last fiscal were approximately worth $18 billion and this year, we are likely to miss our target of $20 billion. Infact if rupee appreciates further, we might not even achieve last year’s figure,” said a textile ministry official.

What exporters need :

•..Levies at state and municipality levels should be returned on all exports. Such levies amount to 6% of the FOB value of exports.

•Pre- and post-shipment credit for the industry at 6% with the latter extended from 3 months to a yr.

•Service tax withdrawal for all exports.

•Moratorium of one year for existing loans under TUFS for principal amounts.