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Amended TUF scheme for textile sector

Business Standard:  December, 2015

New Delhi: The textile sector is set to receive some much needed assistance with the Cabinet Committee on Economic Affairs (CCEA) approving the Amended Technology Upgradation Fund Scheme (ATUFS) on Wednesday.

Originally introduced by the government in 1999, the scheme aims to help the industry upgrade operational technology and provides fixed subsidies to entrepreneurs who invest in this regard.

While replacing the Revised Restructured Technology Upgradation Fund Scheme (RR-TUFS), the new scheme will be implemented across two broad categories. For the sub sectors of apparel, garment and technical textiles, upto 15% subsidy would be provided on capital investment, subject to a ceiling of Rs 30 crore for entrepreneurs over a period of five years.

The remaining sub-sectors would be eligible for subsidy at a rate of 10%, subject to a ceiling of Rs 20 crore on similar lines.

The textile industry is India’s largest employer after agriculture, accounting for 14% of India’s exports, but has recently lost ground to Bangladesh and Vietnam in the global market as the preferred supplier for readymade garments.

While more than Rs 21,000 crore has been provided as assistance to the industry during 1999–2015, the core issue of mass adoption of newer technologies, crucial for making the textile industry globally competitive and reducing soaring capital costs still remains.

Medium and small scale players in the industry have been the main beneficiary with total investments worth Rs 2,71,480 crore being generated along with nearly 48 lakh new jobs.

In 2012, then commerce minister Anand Sharma announced its continuation for the 12th Plan period of 2012-17, with an outlay of Rs 11,900 crore. Of this, Rs 6,000 crore has been released so far.

The industry utilised Rs 12,383 crore against the budgetary allocation of Rs 13,785 crore during the 11th Plan. Allocations under the previous RR-TUFS scheme did not prescribe sectoral ceilings for the spinning, powerloom and handloom sectors. Investments in the sub sector of spinning were Rs 34,347 crore and in the weaving sector, including powerlooms and handlooms was Rs 9,750 crore.

The government started with a capital subsidy when it was introduced in 1999. Later, the mode of relief was changed to interest subvention.

The new amended scheme aims to plug the loopholes in the earlier scheme and improve Ease of Doing Business. The government has said it expects investments worth Rs one lakh crore to be bolstered through the scheme and over 30 lakh additional jobs.

The CCEA has approved a budget provision of Rs 17,822 crore of which Rs 12,671 crore is for committed liabilities under the ongoing scheme, and Rs 5,151 crore is for new cases under ATUFS.

The scheme lays emphasis on the promotion of Technical Textiles, a sunrise sector, for exports. It will also encourage better quality in processing industry and check the need for import of fabrics by the garment sector.

Conversion of existing looms to better technology looms will also receive a major push.for improvement in quality and productivity.