Union Minister for Textiles Dayanidhi Maran announced on August 6 the release of Rs. 2,546-crore subsidy under the Technology Upgradation Fund Scheme (TUFS). He also said that the amount would be credited to the bank accounts of the beneficiaries within three working days.

The industry has welcomed the move as “substantial relief” and the beneficiaries have started receiving the amount. For a sector that faced problems on several fronts during the last two years and is in dire need of relief measures, release of the TUFS amount is expected to ease the working capital availability. In this release, some units have received subsidy arrears of over Rs. 30 crore.

When the industry got into a tough period, the working capital availability was affected and the industry had sought adequate allocation to clear TUFS arrears.

The release of the amount (Rs. 2,546 crore) in one tranche now has cleared the TUFS backlog till the end of June this year. According to the Textile Commissioner, A. B. Joshi, “This will give immediate relief to improve the cash flow situation as the units are affected by the slowdown”.

About Rs. 1,000 crore more is needed this year to meet the needs of the next two quarters, says D. K. Nair, Secretary General of the Confederation of Indian Textile Industry.

Though the working capital availability has eased now, the operating situation remains the same with demand contraction in the overseas market and pressure on prices, adds K. V. Srinivasan, Chairman of the Southern India Mills’ Association.

There are faint signs of revival in the domestic market. However, the export market remains dull. Over 50 per cent of the country’s textile goods are exported, mainly to the U.S. (nearly 30 per cent of the exports are to the U.S.).

According to the data released by the U.S. Department of Commerce, U.S. imports of textile and clothing from India declined by 11.43 per cent during the first six months of 2009 as compared to the same period in 2008.

“We are getting queries even from the U.S. But, the prices quoted are low as China and Bangladesh are able to supply at nearly 10 per cent lower prices,” says A. Sakthivel, President of Tirupur Exporters’ Association. The industry hopes that the Foreign Trade Policy will address this issue with higher drawback rates and make the industry competitive in the international market.

Demand contraction in overseas markets

Industry hopes trade policy will make it competitive

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