India: TUFS Continuation approved by Cabinet Committee on Economic Affairs; Investment in Textile industry to boom

Market Intelligence

India: TUFS Continuation approved by Cabinet Committee on Economic Affairs; Investment in Textile industry to boom

The Cabinet Committee on Economic Affairs today approved the continuing the Technology Upgradation Fund Scheme (TUFS) during the 12th Plan period with a major focus on powerlooms. The total budget outlay for continuation of the scheme in the 12^th Plan is about Rs.11,900 crore.

The Cabinet Committee on Economic Affairs headed by the PM approved allocation of Rs. 2,400 crore under TUFS in the current financial year 2013-14.

To discourage the import of second hand machinery and promote indigenous manufacturing of textile machinery, Interest Reimbursement (IR) on second hand imported shuttleless looms is reduced from 5 percent to 2 percent. On the other hand, for investor’s in new shuttleless looms capital subsidy is raised from 10 percent to 15 percent and IR from 5 percent to 6 percent. The margin money subsidy is also increased from 20 percent to 30 percent with an increase in subsidy cap from Rs.1 crore to Rs. 1.5 crore.

Capital subsidy for handloom and silk sectors is also increased from 25 percent to 30 percent. Additionally, margin money subsidy cap would be increased from Rs.45 lakh to Rs. 75 lakh in respect of MSME and Jute sectors. A pilot project for Hire-Purchase of new shuttleless looms shall be introduced with a plan outlay of Rs.300 crore within TUFS to enable poor powerloom weavers, having limited capacity to make capital investments, to upgrade their looms through payment of easy installments.

However, the approved TUF Scheme has continued sector wise cap of 26 percent applicable only for the spinning segment while other segments have been exempted from such cap to enable balanced growth across the value chain.

The continuation of TUFS is aimed at stimulating capital investment in the textile sector to achieve growth in the fiber, yarn, fabric and garment production chain. Govt. expects that the textile industry should register 11.5% annual growth in volume terms and 15% growth in export value terms through TUFS assistance. It is also expected to generate additional employment to 15.81 million people.