Textile fund validity after FY22 under review
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Textile fund validity after FY22 under review

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The government is considering a proposal to extend the validity of its main investment program for the textile and clothing sector beyond March 31, until a new program, which is in the works, is finalized, according to sources.

FE reported last week that the government is bolstering a program of Rs 16,635 crore that will not only replace the latest avatar of the Technology Upgradation Fund Scheme (TUFS), but also promote integrated manufacturing facilities and technology adoption in a big way to help India to regain its lost share of the world market. The new scheme will be called the Textile Technology Development Scheme (TTDS).

“The new arrangement will take some time. Further consultation is required to finalize certain aspects of the scheme. There is therefore a proposal to extend the validity of the current regulation. The government will make a phone call shortly to see if the extension will be granted,” one of the sources said.

In notifying the Amended Technology Upgradation Fund Scheme (ATUFS) in January 2016, the government had an expenditure of Rs 17,822 crore (Rs 12,671 crore for settling pending claims under the scheme’s previous avatars and Rs 5,151 crore for implementing the ATUFS) reserved until FY22. The scheme is to mobilize new investment of about Rs 95,000 crore in the textile and clothing sector by FY22 and create 3.5 million new jobs. However, until FY21, it was able to boost projects worth only Rs 46,861 crore while the grant disbursement was Rs 3,378 crore.

The TUFS, the earliest version of ATUFS, was introduced in 1999 to provide funds to the textile industry to upgrade technology in existing units and establish new ones with state-of-the-art facilities. The idea was to improve their viability and competitiveness in both domestic and export markets.

Under the existing scheme (ATUFS), garment and technical textile companies will receive a 15% subsidy on capital investment, capped at Rs 30 crore for each investor. The remaining segments such as weaving, processing, jute, silk and handlooms will get 10%, capped at Rs 20 crore.

Before the ATUFS was introduced, the various versions of the TUFS had attracted investments of more than Rs 2.71 trillion in about 16 years in about 16 years through FY15, according to a previous official estimate. Grants of Rs 21,347 crore were paid out under the scheme during this period and many pending claims were settled later. The capital-intensive spinning industry is the major beneficiary of the TUFS as most of the investments have been made in this segment. Of course, with the change in incentive structure under the ATUFS, spinning mills have not fully reaped the benefits in recent years. Large-scale capacity expansion in the spinning mill in previous years also discouraged them from undertaking another expansion.