Apparel Online India Issue 1-15 March '18 | Page 25

TEX-FILE
“I must commend the Government
for having made a beautiful
seamless system of payment with
no human interface. However, the
lack of education in many TUF cells
and branches of banks and SME
companies has led to many being
stuck for years and still not being
clear as to how they will get the
money. The Government has now
finally initiated a reconciliation
process, hope the same gets
completed fast and companies get
their dues,” says Sanjay Jain, MD,
TT Ltd. and Chairman CITI/
Textile Sector Council /NITRA.
Often, we hear from companies
that they applied for TUF but got
rejected… So where is the gap? “The
gap is of not understanding the terms
and conditions of the TUF scheme
in vogue at the time of application.
People assume that old systems
are still being followed, while the
Government, based on its learnings
has been continuously amending
things. This communication gap
has led to many problems for many
people,” shares Jain. Ironically, the
very fact that the scheme has been
flexible to change with time has
been among its biggest problems.
Dhamodharan is of the view that
changing the policy continuously
is also a very important factor for
the success of TUF so that one can
avoid ‘block out periods’ - kind of
situations common in the schemes.
It is interesting to note that among
all players of the textile segment,
investments in spinning worth
Rs. 34,347 crore (in the analyses
period 1999-2015) much outpaced
investments made in the weaving
sector, which was Rs. 9,750
crore (including powerlooms and
handlooms) during the period.
“Despite its many pain points, TUF
has definitely helped the industry
grow, especially the spinning sector
and large units have benefited
immensely from the same,” opines
Jain. However, a mistake many
companies in the segment have
made is to invest/expand under
TUF, without proper groundwork
and practical understanding of the
industry, especially the new players.
Many overlooked the fact that
spinning mills depend on the
availability of raw cotton at the right
price and that TUF only takes care
of financing regarding the fixed
assets. The issues of arranging for
finance to meet the working capital
requirements are still left in the
company’s own accord. “Government
should only use TUF schemes for
value addition in manufacturing
and also for modernisation of
technology,” argues Dhamodharan,
adding, “For spinning expansions,
hereafter Central and State
Governments should not extend TUF
schemes for new projects because
already India is facing excess
capacity situation in spinning and
standalone spinning mills’ EBITDA
and margins are shrinking on Y-o-Y
basis for the past few years and , it’s
difficult for a standalone spinning
mill to survive and repay the debts in
case of new investments in current
trends.”
The future and success of TUF
scheme in bringing momentum to the
textile industry lies in investments
upstream – in garmenting, home
furnishing and technical textiles.
Understanding this, the Government
made major amendments to
the scheme in 2016, which are
effective, up to March 31, 2022. The
introduction of ‘Amended Technology
Upgradation Fund Scheme’
(ATUFS) in place of the existing
‘Revised Restructured Technology
Upgradation Fund Scheme’ (RR-
TUFS), was conceived with a clear
intention to make TUF broad-based
and include many more areas and
enhance the benefits under the new
proposed textile policy. ATUFS
provide one-time capital subsidy for
While replacing
the Revised
Restructured
Technology
Upgradation Fund
Scheme (RR-
TUFS), the new
scheme (ATUF)
is implemented
across two broad
categories. For
the sub-sectors of
apparel, garment
and technical
textiles, up to
15% subsidy is
provided on capital
investment, subject
to a ceiling of
Rs. 30 crore for
entrepreneurs
over a period of
five years. The
remaining sub-
sectors are eligible
for subsidy at a rate
of 10%, subject to
a ceiling of Rs. 20
crore on similar
lines.
investments in employment- and
technology-intensive segments
of the textile sector with an aim
at promoting exports and import
substitution. It is being looked
upon as an important tool to drive
the Prime Minister's vision of
‘Make in India’.
Textile companies have reacted
very positively to the move, but
those companies who have already
taken subsidies under old schemes
feel restricted as they cannot
take benefits for new areas like
technical textiles. “TUF scheme
has been over the years optimally
used by the industry, but since CIS
(Capital Investment Subsidy) per
individual entity is only Rs. 20 to
Rs. 30 crore, it is not beneficial to
the entire industry as Para 4.1.2
of guidelines state. However, in
case the entity has availed subsidy
under RRTUFS, it will be eligible
only for the balance amount within
the overall ceiling fixed for an
individual entity. This means that
all the units already availing the
TUF benefits in previous schemes
cannot get the new loans under
ATUFS due to exceeds in the CIS
cap value,” bemoans RK Dalmia,
President, Century Textiles.
To get full benefit under the
amended scheme, ensure that
no rejections happen and funds
are made available to deserving
companies; besides associations
need to play a more active role in
educating their members. This
is also important in the wake of
many states now coming up with
aggressive policies, which puts
further thrust in expansion and
modernisation. “However, for
investors looking at state schemes,
it is important to first understand
the track record of the Government
in paying them, otherwise it may
get difficult for companies whose
viability is based on subsidies,”
concludes Jain prudently.
www.apparelresources.com | MARCH 1-15, 2018 | Apparel Online India
25