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Cotton textile sector to attract Rs 4,000-cr capex in 6 months

The blackout period between two subsequent subsidy announcements this time was almost 18 months

Dilip Kumar Jha  |  Mumbai 

The cotton textile industry is set to attract Rs 4,000 crore investment in the next six months, with the sector set to receive the so-called margin money from the finance ministry under the Technology Upgradation Fund Scheme (Tufs).

The government had recently decided to extend Tufs, which aims to make funds available to the textile industry for technology upgrade of existing units as well as to set up new units, to the 12th five-year Plan.

The most labour-intensive sector--spinning--is likely to get the highest benefit of the extension in Tufs. The sectors benefited are spinning, weaving, processing, technical textiles, jute, silk, garmenting, cotton ginning, wool and powerlooms.

“We have been given assurance repeatedly by the textile ministry that the amount will be released by the finance ministry soon. Considering the amount as margin money, the industry can borrow another Rs 3,200 crore as working capital from banks totalling thereby an investment of Rs 4,000 crore in the next six months," said Manikam Ramaswami, chairman, Cotton Textiles Export Promotion Council.

Many state governments have offered schemes to attract investment in the sector away from Maharashtra and Gujarat to their states. Until now, the two states were the hot destinations for the textile sector. But looking at the government's incentive schemes and cheap labour, investors have started shifting towards the northeastern states.

Normally, the blackout period (time difference) is three to six months between two subsequent subsidy announcements. This time, however, it was almost 18 months. Consequently, investors during this period awaited announcement of the Tufs for fresh decisions on capital expenditure.

Fresh investment in the textile sector is set to accelerate export growth. Indian exporters would be able to take advantage of the rupee depreciation, which made them more competitive globally. India-made apparels were competitive at the rupee's level of 53 against the dollar, which depreciated around 25 per cent from this level, making exports more profitable.

Texprocil believes India has the potential to grow by at least 50 per cent in apparel exports generating over $5 billion of foreign exchange every year. Being the textile sector labour-intensive, the industry would be able to generate at least 200,000 jobs every year. Tufs was introduced on April 1, 1999. In its first 10 years, the scheme received an overwhelming success and was extended periodically.

In the newly announced Tufs, capital subsidy for new shuttleless looms has been raised from 10 to 15 per cent and the rate of interest reimbursement has been increased from five to six per cent. Further, the margin money subsidy has been increased from 20 to 30 per cent with an increase in subsidy cap from Rs 1 crore to Rs 1.5 crore.

"There was no fund available for spinning mills since April 2012. With the inclusion of TUFS in the 12th five-year Plan, the spinning mills will also get encouragement to boost investment to support overall exports," said D K Nair, secretary general, Confederation of Indian Textile Industry.

First Published: Wed, September 04 2013. 22:33 IST