Textile industry urges to continue TUFS in the XIth Plan

New Delhi, Dec 18 (UNI) In the era of quota-free regime where Indian textile exporters are vying for a larger slice of the global market, the industry today vociferously made out a case for continuing the 'Technology Upgradation Fund Scheme' (TUFS) for another five years, making it co-terminus with the Eleventh Five-Year Plan (2007-11) period.

''The continuation of the scheme will enable the textile industry to develop competitiveness and globalise its operations in the quota free-regime,'' Mr Shekhar Agarwal, Chairman, Confederation of Indian Textile Industry (CITI) told reporters here today.

The strong reaction from the industry came in response to reports that the TUFS would be discontinued after March 31, 2007. The scheme provides soft loans for modernisation and upgradation of textile machinery.

CITI Chairman warned that ''if TUFS discontinued, the growth tempo for exports will be stagnated, only domestic market will grow, free trade agreements (FTAs) with neighbouring countries will attract heavy imports, competition will grab market within the country, loss of valuable foreign exchange due to low exports, textile imports may jump from 2.7 billion dollars at present to 10 billion dollars in the next five years.'' The objective of TUFS was to make investment in textiles and clothing attractive by offering a rate of return comparable to other industry segments.

''Withdrawal of the TUFS will erode investment in capacity building, making many textile units across the country lose the competitiveness built over the last few years,'' Mr Agarwal said and added that ''many textile units may shift their production basis to neighbouring countries like Kazakhistan and Uzbekistan where cotton is available at 20 per cent discount, power at Rs 1.20 a unit, cheaper gas and about nine year tax holiday.'' The fears of the industry emanate from China becoming a member of the WTO in 2008 and entering the quota free markets where Indian exports are on the rise. At present, China continues to operate under the Multi Fibre Agreement (MFA).

He said discontinuation of the Scheme at this stage will nullify and negate the confident steps the industry has been taking to increase its share in the world textile market from 4 per cent to 7 per cent by 2011-12.

The industry leaders have cautioned the Government not to be trapped into the arguments that TUFS is not compatible with the WTO norms. Preponderance of support mechanisms for various sectors, despite incompatibility with the WTO norms, in countries like the US and China is a case in point, he added.

Mr Agarwal said the textile industry needs an investment of Rs 1,94,000 lakh during the period 2007-12 to catalyse a GDP growth over 8 per cent by the end of 11th Plan. The industry can also crease additional employment of 14 million workers across the textile chain.

''The industry has the potential to reach a size of 110 billion dollars by 2012. There should be caliberated policy to push up economies of scale for getting price advantage in the international market and this magnitude of growth is possible only when the industry is adequately equipped for a technology leap,'' the CITI Chairman said.

He pointed out since the start of TUFS in 1999-2000 not many people came forward to benefit from the Scheme. But, with the dismantling of quota regime from January 1, 2005, the Scheme took off speedily and the industry tried to benefit the most from TUFS for upgradation and modernisation of its units to enter the competition market.

Mr Agarwal suggested that the policy framework should take into cognizance in Free Trade Areas (FTAs) that might become operational reality by 2012. A case in point is ASEAN free trade zone. With further lowering of peak customs duty and imminent abolition of specific duties, imported textile items will be increasingly competing with Indian products not only from ASEAN but also from countries like Bangladesh, Pakistan, Vietnam and Cambodia.

Some these countries can outwit Indian textile industry with the labour arbitrage and infrastructure advantages they have and will continue enjoy for many years.

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