TUFS needs to be restored if textile sector is to progress: Ficci

New Delhi, Sept 24 (UNI) Concerned about the sharp deceleration in the growth of cotton textiles and its products in July 2007, industry chamber FICCI today sought immediate restoration of the Technology Upgradation Scheme (TUFS) for the sector.

TUFS was launched by the Ministry of Textiles in April 1999, to facilitate the modernisation and upgradation of the textile industry, both in the organised and unorganised sectors.

''The government has decided to keep TUFS in abeyance for sanction of any fresh loans from April 1 2007 till the finalisation of modifications and issuance of instructions in this regard,'' said a statement.

In the absence of benefits under TUFS, the growth and modernisation of the textile industry could be significantly affected, said Ficci Textile Committee Chairman P D Patodia.

In July 2007-08, cotton textiles grew by only 5.1 per cent as compared to 14.3 per cent in July 2006-07, while textile products witnessed a growth rate of mere 3.6 per cent in July 2007-08, compared to 28 per cent in 2006-07.

Average growth rate of cotton textiles for the first four months (April-July) of 2007-08 was 6.9 per cent against 12 per cent in 2006-07, Ficci said.

In the coming months, the impact of Rupee Appreciation and absence of benefits under TUFS could further decelerate the growth of the sector, the Chamber said.

The scheme has been instrumental in facilitating the rapid investment in the textile sector in the last few years, which is also evident from its performance for the period April-February 2006-07, said Ficci.

During April-February 2006-07, 3,539 applications were sanctioned under TUFS, having a project cost of Rs 35,651 crore, whereas in April-February 2005-06, only 688 applications were sanctioned with a project cost of Rs 10,719 crore.

Under TUFS, during April-February 2006-07, total number of applications sanctioned increased by 414 per cent ie, from 688 to 3,539 applications, amount sanctioned went up by 192 per cent ie, from Rs 5,075 crore to Rs 14,835 crore and amount disbursed increased by 284.6 per cent ie, from Rs 2,609 crore to Rs 10,035 crore, as compared to the same period in 2005-06.

In terms of subsidy given by the Government under TUFS, the interest reimbursement was Rs 268 crore in 2004-05 and Rs 426 crore in 2005-06.

In 2006-07, the subsidy has almost doubled to more than Rs 800 crore, Ficci said.

Realizing that the single most important factor inhibiting technology upgradation in the textile sector is the relatively high cost of capital in the current scenario, there is an immediate need to restore the benefits under TUFS.

TUFS provides for a reimbursement of five percent points on the interest charged by the lending agency for a technology upgradation by a firm as per the specified guidelines.

For small-scale textile and jute industry, there is an option to avail of either 15 per cent Credit Linked Capital Subsidy (CLCS-TUFS) or five per cent interest reimbursement.

''There is a need to modify TUFS so as to focus on the weak links of value chain of domestic textile sector like weaving, processing and garment sectors,'' said Mr Patodia.

The Budget made an allocation of Rs 911 crore under TUFS for 2007-08, which is insufficient for meeting the requirement of textile sector, FICCI added.

In order to accelerate the investments in the sector, the allocation has to be minimum of Rs 2,000 crore for the current year and all applications need to be sanctioned under the 'fast track' mode now, Ficci emphasised.

UNI