Technology Upgradation Fund Scheme for Textile Industry

In order to provide encouragement to textile and jute industries for taking up technological upgradation and modernisation programmes, by providing them access to timely and adequate capital at internationally comparable rates of interest, the Gol has launched a focused and time-bound Technology Upgradation Fund Scheme (TUFS) for the Textile and Jute Industries with effect from April I, 1999. The main feature of TUFS is the 5 per cent reimbursement on the interest actually charged by the identified financial institutions on the sanctioned projects on the rupee term loans and a cover for exchange rate fluctuation not exceeding 5 per cent per annum for loans in foreign currency. Projects implemented by units in the textile and jute sectors for technology upgradation with eligible technology can be covered for assistance from designated nodal agencies. Technology levels have been benchmarked in terms of specified machinery for each sector of the industry and machinery with lower technology levels is not permitted for funding under the scheme. Eligibility requirements also entail capable management for implementing the projects, availability of adequate working capital and other sector specific criteria such as proper effluent treatment and quality control systems. While the Industrial Development Bank of India and IFCI Ltd. have been nominated as the nodal agencies for the textile industry (other than SSI sector) and jute industry respectively, SIDBI has been designated by the Gol as the nodal agency for operation of the scheme in respect of the SSI units in textile, cotton ginning and pressing sectors. Since the launching of TUFS, SIDBI has been operating the scheme both through direct finance and refinance routes. 

The Refinance Scheme for Textile Industry under Technology Upgradation Fund of SIDBI envisage interest incentives of 5 per cent and/or cover for exchange rate fluctuation upto 5 per cent per annum on the loans availed of by small scale units from primary lending institutions. Under the refinance scheme, all PLIs are eligible to avail of refinance as well as interest incentive reimbursement in respect of TUF projects, subject to such proposals conforming to norms and parameters stipulated by SIDBI, in addition to the guidelines prescribed by the Government of India. Since SIDBI covers even non-refinanced cases for disbursement of interest incentive to eligible PLIs, it is as such not compulsory for PLIs to avail refinance from SIDBI in respect of their assistance under TUFS. 

The direct assistance scheme under TUFS is operated through network of SIDBI offices. The assistance is provided at the Commercial Lending Rate of SIDBI. A minimum term loan for direct assistance, in general, has been fixed at Rs. 5 million, while for the SSI units graduating out of the sector, the amount of loan is decided on a case to case basis. The scheme prescribes the eligible units to bring in a lower promoters’ contribution of 20 per cent of the project cost (as against normal promoters’ contribution of 30-35 per cent) for rupee term loan and 33.33 per cent of the project cost for foreign currency term loan. 

The scheme is expected to facilitate the tardy modernisation in the textile industry to a great extent. The scheme presents the industry with an opportunity to raise its productivity, quality and cost competitiveness to contemporary levels. SIDBI, as one of the nodal agencies for channelising assistance/interest reimbursements under the scheme to SSI units, expects to play a major role in the whole exercise particularly in view of the fact that a majority of the units in the textile sector are small scale industries.

Schemes of Assistance Introduced by SIDBI 1990 

Marketing Infrastructure Scheme
Direct Discounting of Bills (Equipment) Scheme
Direct Discounting of Bills (Components) Scheme
Infrastructure Development
Scheme for Ancillarisation
Resource Support to Factoring Companies
Equipment Finance Scheme
Project Finance Scheme
Venture Capital Scheme 
Integrated Infrastructure Development Scheme
Foreign Currency Term Loan
Direct Equity 
Pre-Shipment Credit in Foreign Currency (PCFC) Scheme
Equity Assistance Scheme
ISO 9000 Certification Scheme 
Marketing Scheme
TDMF Scheme 
Vendor Development Scheme
Credit Rating for SSIs 
Direct Factoring Services 
Line of Credit for Marketing
Exports Bills Financing 
Pre and Post-shipment Credit in Rupees
Bills Rediscounting against Inland Supply bills of SSIs