Tufs gets lukewarm response, again

The Technology Upgradation Fund Scheme (Tufs), the sole subsidy scheme to boost investment in the textiles sector, has received a lukewarm response from investors, owing to uncertainty on the scheme being extended beyond March and the prevailing gloom over the country's economy.

The Planning Commission has given an in-principle approval for the extension of Tufs in the 12th five-year Plan.

In the 11 years since it was introduced in 1999, Tufs accounted for investments of Rs 2,08,000 crore. After the first allocation of about Rs 11,200 crore, a second tranche of Rs 1,972 crore was allocated for 2011-13 by the ministry of textiles. However, it saw poor response again, leading to disbursal of merely 13 per cent, or Rs 256 crore, during that financial year. The government then extended the scheme for another year, without allocating extra funds, owing to expectations companies would invest aggressively in the textiles sector. However, the scheme again saw poor response.

Industry experts say banks have disbursed just Rs 96 crore in the first eight months of the current financial year due to waning investor confidence in the sector.

“Without making major fundamental changes in the scheme, we are trying to increase credit flow to the power loom and processing sectors. These sectors would get a little more attention than other sectors,” Textile Commissioner A B Joshi had said earlier.

After the scheme was included in the 12th five-year Plan, textile companies are waiting for an extension in the subsidy scheme. However, there is no clarity on the status of the scheme and this has led to many companies delaying decisions on expansion plans.

This year, many expansion projects have taken a back seat. As the US and the Euro zone, the biggest markets for Indian textile exports, were stressed, garment exporters didn’t increase capacity. “Once there is clarity on Tufs being included in the 12th Plan, many companies would come forward to avail of the benefits of the scheme,” said Mitesh Shah, vice-president of Mandhana Industries, a Mumbai-based textiles major.