Friday, December 24 2004 12:35 Hrs (IST) - World Time -

New Delhi: The year gone by was spent by the Government and the textile industry in preparation and anticipation of dawning of a new global textile trade regime from January 1, 2005.

Central Value Added Tax system

The previous National Democratic Alliance (NDA) Government had begun the process of addressing the distortions in the tax regime applicable to the sector to make composite mills more viable, but by bringing even the unorganised sector in Central Value Added Tax (CENVAT) chain it opened a political can of worms.

It became an election issue in some parts of the country and unorganised sector was promised by some parties that they would be exempted from CENVAT.

After the United Progressive Alliance (UPA) Government took over, it cut the knot by making CENVAT optional for composite mills and unorganised players in the textile sector.

This move consolidated the growth in the textile sector and companies unveiled huge expansion plans to tap the opportunity that will come up after the quota system in the world textile trade goes.

According to the Government, country's textile exports could double to $ 25 billion in next two years and touch $ 50 billion by 2010.

The organised players in the textile sector, whose competitiveness was eroded over the years because of additional taxes on them, will need huge doses of investment to make them viable again.

According to some experts, the textile industry requires Rs 90,000 crore of new capital in the next five years.

Technology Upgradation Fund Scheme

With Government waking up to the export potential of the textile segment, it fine-tuned the Technology Upgradation Fund Scheme (TUFS) for the sector that was running for the last few years.

It sat down with the banks running the scheme, which provides five per cent interest subsidy, and told them to ease procedures for disbursement of loans.

The investments by the organised players, which had started pouring in the last three years, received a major boost.

Till September 30 this year, disbursements under TUFS have reached Rs 956 crore as against Rs 856 crore in 2003-04.

The number of applications received during the last fiscal for loans under the scheme almost doubled to Rs 3,356 crore against the number of applications received in 2002-03.

The sanctions during the last fiscal were also up nearly 100 per cent to Rs 1,341 crore, against the previous fiscal.

The Government is now planning to raise subsidies provided under TUFS to 8 per cent from the present 5 per cent.

Enthused by the offtake from TUFS, it is also thinking of increasing the corpus of the fund by 160 per cent to Rs 65,000 crore from Rs 25,000 crore in the next two years.

In the next three years it is making efforts to increase the allocation to Rs 90,000 crore.

Textiles Minister Shankersinh Vaghela said, "The offtake from the Rs 25,000 crore TUFS has been just Rs 6,000 crore in the last five years. We want to increase the off take. I have discussed the issue of increasing subsidy with my colleagues and the Cabinet will take a decision on it soon."