Govt may sanction more funds to upgrade textiles sector

The government is soon expected to take up the proposal to increase the total fund sanction to Rs 15,000 crore for modernisation of the textiles industry in the 11th Five-Year Plan.

In order to promote modernisation of textiles units in the country, the government subsidises 5% of interest payments on loans sanctioned under the scheme.

The government had earlier earmarked Rs 8,000 crore for this purpose, which was exhausted by June, 2010.

Subsequently, the government had asked banks to suspend new sanctions under the Technology Upgradation Fund Scheme (TUFS) till allocation of additional funds was approved by the Cabinet Committee on Economic Affairs (CCEA).

"The additional funds proposed to be allocated for TUFS will be utilised for payment of existing commitments worth about Rs 5,432 crore, besides new initiatives worth Rs 1,972 crore, during the remaining months of the XIth Plan (2007-12)," sources said.

This enhanced allocation is expected to leverage additional investments of Rs 47,000 crore in the textiles sector.

Of the Rs 7,000 crore additional funds, which would be provided under the scheme, Rs 3,100 crore would be allocated for 2011-12.

"The additional funds proposed to be sanctioned for new initiatives under TUFS will not be open-ended and will be capped at Rs 1,972 crore," sources said.

Banks and financial institutions have disbursed loans worth Rs 73,168 crore, since TUFS was introduced in 1999.

The $63-billion Indian textiles industry has been demanding continuation of the scheme, as the freeze would adversely impact their investment and modernisation plans.

The ministry said segments such as spinning, cotton ginning and pressing, garments and weaving are among the major beneficiaries of the scheme.

The textiles industry, which provides employment to about 35 million people, requires constant modernisation of plants and machinery to remain competitive in global markets against rivals like China, Bangladesh and Sri Lanka.