India`s TUFS to boost investment in the weaving sector

Trade & Policy

India`s TUFS to boost investment in the weaving sector

The Technology Upgradation Fund Scheme (TUFS) which was approved by the Indian Government yesterday for the 12^th Five Year Plan period of 2012-2017 to benefit the weaving sector. The revised guidelines under the TUFS offer better incentives for investment in new weaving machinery which will be a boon for weaving loom manufacturers as well. Indigenous weaving machinery manufacturers were demanding abolishment of incentives for secondhand machinery imports and increasing import barriers for long time as old age technology does not help the industry and defeat the purpose of technology upgradation. Government has finally adhered to the justification offered by the machinery manufacturers and reduced interest reimbursement (IR) on second-hand imported shuttleless looms from 5% to 2%. On the other hand, for new shuttleless looms, capital subsidy is raised from 10% to 15% and IR from 5% to 6%. Also, Margin money subsidy is increased from 20% to 30% with an increase in subsidy cap from Rs 1 crore to Rs 1.5 crore for powerlooms.

In addition to the above, to enable the inferior powerloom weavers to make capital investments and modernize; a pilot project for Hire-Purchase of new shuttleless looms is being introduced with a plan outlay of Rs 300 crore. Via this pilot, wavers will be allowed to make capital investments to upgrade their looms through payment of easy installments.

In the previous outlays, it was observed that the spinning sector would consume a lion’s share in total TUF outlay, primarily because it is not too technically challenging an industry to venture into either for vertical integrators or newcomers. Whereas other technically challenging sectors such as processing and garmenting were left behind. To avoid this kind of a skewed development of the Indian industry, sectoral cap of 26% has been retained for the spinning sector, and there is no cap for other sectors, to enable balanced growth across the value chain. Indian Govt. has allocated Rs 2400 crore (Rs 24 billion) for the financial year 2013-14 under TUFS.