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G. Gurumurthy

Coimbatore , Dec. 30

THE Tirupur Exporters Association has suggested that technology upgradation fund scheme (TUFS) component be provided with capital subsidy element too along with the subsidised interest component to motivate the textile industry to modernise.

The introduction of a capital subsidy component along with the 5 per cent interest subsidy under TUFS for modernisation projects is necessary to make any investment on modernisation by the textile entrepreneurs viable, considering the fact that the overall profitability in textile sector remained low.

The low profitability and higher cost of modernisation/capacity expansion have created some apprehension among the members of the textile industry on whether their investment would get them any reasonable return on capital invested, the association has said in its presentation made before Dr Teli, National Coordinator of the TUFS Impact Evaluation Project during his visit last week to Tamil Nadu.

The association citing the knitwear industry's modernisation process said that the cost of modernisation has proved quite high due to heavy dependence on import of machinery and hence, the industry looked forward to certain amount of capital subsidy assistance too along with the interest subsidy. It suggested that at least a 12 per cent capital subsidy should be made available along with the 5 per cent interest subsidy under the TUFS.

The association also favoured the SSI spinners' demand for removing the 12,000-spindle threshold limit insisted under the TUFS for sanction of the concessional lending. It said that with the latest technology, even 6,000-spindle units were economically viable and a number of such mills were already working profitably.

In this respect, it felt there was a need to reconsider the stipulation that the stand-alone spinning mills seeking TUFS funding should invest on downstream production process to be eligible for sanction of financial assistance.

In the prevailing environment in the industry, the spinning sector and the yarn consuming industry such as the garmenting units thrived by remaining independent of each other. Even in the case of knitwear exporters, who have set up their own spinning mills as part of backward integration, the surplus capacity available with the spinning unit could cater to large number of other knitwear units as well. Hence, the insistence of creating downstream investments by the stand-alone spinning units should be dispensed with.

The association's presentation had pointed out that the knitwear industry made a maximum utilisation of the TUFS and it felt the need for relaxing TUFS' norms relating to the investment limit on buildings. The present cap on investment on buildings at 25 per cent of the project cost should be enlarged for the knitwear industry projects. Being labour-intensive, the knitwear production units needed spacious buildings for housing their expanded and modern production lines, hence the need to enlarge the limit on investment on building under the TUFS.

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