The textile ministry has sought more benefits for the weaving sector while the spinning sector incentives will be reduced under the revised Technology Upgradation Fund Scheme (TUFS). The scheme, which was very popular in the textile industry just a few years ago, is being restructured and will be part of a next five-year plan. The ministry will soon submit a revised proposal to the cabinet in this regard.
The weaving sector is expected to get six per cent interest rate subsidy, up from five per cent. The Textile Commissioner’s office, which is an administering authority, had held several rounds of consultation on this.
According to textile players, the spinning sector has improved over the years and weaving is the one which requires more hand holding, hence the emphasis has been laid on weaving, said the source familiar with the development.
"The weaving sector is expected to receive more benefits from TUFS this year which the Union textile minister has already announced, there could be a possibility for the interest rate cut to be higher as well," said a person aware of the development.
Initially, the textile ministry had proposed Rs 12,000 crore to be set aside for the sector. The Planning Commission had earlier given in-principle approval for the scheme to be included in the 12th Plan. The amount, which will be finally allocated to TUFS, could differ from the amount the ministry has proposed.
A source in the textile commissioner’s office said: “Without making major fundamental changes in the scheme, we are also trying to increase credit flow to the power loom and processing sectors. These sectors would also get a little more attention than other sectors."
The scheme, first introduced in 1999, benefited projects involving investments worth Rs 2.08 lakh crore. After the first allocation of about Rs 11,200 crore, a second tranche of Rs 1,972 crore was allocated for 2011-12 by the ministry of textiles. However, it drew poor response, leading to the disbursal of just 13 per cent, or Rs 256 crore, during the financial year. The government then extended the scheme for another year, without allocating extra funds, on expectations companies would invest aggressively. However, the scheme again drew poor response.
In the last two years, textile companies have slowed down their expansion plans due to economic uncertainties in major economies, which caused textile exports to slow down, who are major importers of Indian textiles hence many players did not avail for textile benefits.