From rough to TUFS

A fortnight ago, the Union Cabinet cleared the new Technology Upgradation Fund Scheme (TUFS) for the textiles industry. This time, it was not only textile companies which were raising a toast; several small companies making textile machinery also joined the party. If apparel makers got to buying subsidised machines again, the benefits would accrue to them as well.

“In the last few months, a strong rupee had eroded the export earnings of apparel makers and they had given up their plans for expansion and upgradation. Now, they will buy our machines again to prepare for the good times ahead,” says an elated Dharmesh Marfatia of Padmalaxmi Enterprise, a Surat-based textile machinery maker.

For the record, the Government has allowed 10% capital subsidy and 5% interest rate rebate under the TUFS 11th Plan Programme. For apparel manufacturers, this is a welcome change. “We expect investments worth Rs 1,50,600 crore. The industry, which is growing at the rate of 8-10% a year, would get a boost and would grow at 12%,” says JN Singh, Textile Commissioner, Mumbai.

This initiative is expected to help reduce the cost of capital for modernisation and upgradation of existing textile units. Any textile manufacturer who now wants to take advantage of TUFS has to go for a new machinery as the benefits are not available on old machinery, the exception being power loom machines (at the most 10 year-old machines). So while the rupee may not be in their control, apparel makers can bring down their costs over time.

Says RL Toshniwal, chairman, The Synthetic Rayon Export Promotion Council: “For the past year the condition of the textile machine manufacturers, some of them who are also exporters, was bad, the condition has worsened in past nine months. The new TUFS would improve their profitability.”

According to industry experts lately many garment manufacturers are also shifting their base from India to other developing economies like Bangladesh, Vietnam and China due appreciation of the rupee. This capital shift takes about three months but now most manufacturers can buy machinery from India, which would again boost sales for machinery.

Meanwhile Lakshmi Machine Works (LMW), which is the market leader in spinning machines expects its marketshare to rise from 60% to 65% due to TUFS. “Though the interest rate rebate under the 11th TUFS plan programme has been reduced to 4% from the earlier 5% for capital spinning machines, we think this would benefit us. Though we compete with several imported machinery and small locally made ones, we think TUFS would be beneficial for textile manufacturing machinery as a whole,” says R Rajendran, CFO, Lakshmi Machine Works.

Small textile manufacturers, who represent about 10% of the total textile machine manufacturing industry, are also expecting their first order. For Marfatia, inquiries have started coming. "It is good that now people have at least started calling us. I am expecting a couple of orders during Diwali, thanks to TUFS," he says.

For many small and medium sized players in the textile machine manufacturing business, TUFS has brought hope. "In the past couple of months there were about 10 orders. And we have got three orders no sooner the textile unit owners came to know of TUFS about five days back," says Manoj Gandhi of Stenmech Engineering Works, another Surat-based company which is into stenters, padding mangle, float dryers and relax dryers.

"At present we don’t have a single Indian garment machine manufacturer, and all machines are being imported. The government is supportive for anyone who wants to enter this segment either by himself or through a joint venture," adds Singh.