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The government is bolstering a program of Rs 16,635 crore that will not only replace its decades-old flagship incentive scheme for capital investment in textiles and clothing, but also promote integrated manufacturing facilities and technology adoption in a major way to enable India to be lost share of the world market.

The Textiles Technology Development Scheme (TTDS), a draft of which has been reviewed by FE, will replace the Technology Upgradation Fund Scheme (TUFS) valid until March 31, 2022. Beneficiaries of a production-linked incentive of Rs 10,683-crore (PLI) scheme the new regulation cannot be used for textiles.

The government aims to attract large-scale investments of about Rs 1.1 trillion through the scheme in five years until March 2027.

The draft scheme consists of two main parts. The first is to promote the production of textile machinery in India and replace imports. It proposes to extend the incentives of Rs 5,120 crore over the next five years.

The second part of the scheme proposes incentives of Rs 4,780 crore for investors looking to set up integrated modern manufacturing facilities. It will also boost technology upgrades in existing clusters and micro, small and medium-sized enterprises (MSMEs) at an additional estimated cost of Rs 2,000 crore over a five-year period.

Various forms of TUFS that have prevailed over the past two decades have boosted investment in the textile and apparel value chain, but the benefits have largely gone to the capital-intensive spinning sector, leaving large capacity gaps in weaving and processing technologies unbridgeable. Economies of scale and integration remain lacking in the later stages of the textile value chain.

Interestingly, the new scheme also proposes to settle all pending grant applications from eligible beneficiaries of previous versions of the TUFS, such as Modified TUFS, Restructured TUFS, and Revised Restructured TUFS. It proposes to set aside Rs 2,479 crore for this.

Likewise, it wants all claims under the current version of the TUFS – Modified TUFS – passed four years ago. It costs the treasury `2,136 crore. These proposals will improve the cash flow of pandemic-affected companies and enable them to boost both production and exports.

Senior industry executives with whom FE spoke said the new scheme essentially aims at three goals: to address certain critical structural bottlenecks, improve the competitiveness of domestic units and encourage them to scale up their operations and regain lost market share globally.

The textile ministry also wants to align its policy intervention through this program with two other critical programs announced for the sector — the PLI scheme and mega-parks, she added.

The textile and clothing sector’s share of the country’s total goods exports dwindled even before the pandemic hit. It had fallen to just 10.8% in FY20, the lowest in about a decade, from 13.7% in FY16. While China remains the world’s most dominant player in both textiles and clothing by a wide margin, India has been beaten by both Bangladesh and Vietnam in clothing exports in recent years.

The new scheme proposes to repay 30% of the capital investment in textile machinery and equipment. Likewise, the companies wishing to set up new integrated units will be offered support amounting to 25% of the capital investment in plants and equipment. Outgoing MSME units also receive up to 25% capital subsidy. However, the incentives are subject to limits that will be linked to investments.

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

A chief executive of a major clothing export company said: “The design scheme looks promising and it will help the fragmented textile and clothing sector, provided the ministry sticks to it.”

Raja M Shanmugham, chairman of the Tirupur Exporters’ Association, praised the main proposals of the new scheme, especially on the plan to provide only capital subsidies, rather than interest subsidies or a combination of both capital and interest subsidies.

However, Shanmugham stressed that the garment industry will seek more clarity on the proposed aid to SMEs under the scheme. “Without adequate aid to MSMEs, the textile and clothing sector – which is dominated by such units – will not prosper,” he added. Tirupur is the largest clothing cluster in the country.

This post Downstream value chain to get tech boost: new Rs 16,635 crore scheme to boost textile capex

was original published at “https://www.financialexpress.com/economy/downstream-value-chain-to-get-tech-boost-new-rs-16635-cr-scheme-to-spur-textile-capex/2464931/”