RESOLUTIONS

TECHNOLOGY UPGRADATION FUND SCHEME
For Textile and Jute Industries (1-4-1999 to 31-3-2004)
Section - 1
No.28/1/99-CTI  New Delhi, the 24th March, 1999.
 

The Indian textile industry occupies a unique position in the Indian economy in terms of its contribution to industrial production, employment and exports. In spite of a strong fibre and production base, for various historical reasons, this industry suffers from severe technological obsolescence and lack of economies of scale. While relatively high cost of state-of-the-art technology and structural anomalies in the industry have been major contributory factors, perhaps the single most important factor inhibiting technology upgradation has been the relatively high cost of capital, even in real terms, in India, especially for an industry usually squeezed for margins. Given the significance of this industry to the overall health of the Indian economy, its employment potential and the huge historical backlog of technology upgradation, particularly in the context of the liberalization of the national industrial and trade policy and globalization of textile trade, it has been emphasized by experts that in order to sustain and improve its competitiveness and overall long term viability, it is essential for the textile industry to have access to timely and adequate capital at internationally comparable rates of interest in order to upgrade its technology level.

In the light of the foregoing, it has been felt necessary to make operational a focused and time-bound Technology Upgradation Fund Scheme (TUFS), which would provide a focal point for modernization efforts through technology upgradation in the industry. The main feature of the TUF Scheme would be a five percent reimbursement on the interest actually charged by the identified financial institutions on the sanctioned projects.

It is, therefore, resolved that a Technology Upgradation Fund Scheme be made operational for the textile, jute and cotton ginning & pressing industries for five years with effect from the 1st of April, 1999. The scheme will provide a reimbursement of five percentage points on the interest charged by the lending agency on a project of technology upgradation in conformity with this resolution. The scope of the scheme, eligibility criteria and operational parameters are defined below: - 
 

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1. DEFINITION OF TECHNOLOGY UPGRADATION
Technology Upgradation would ordinarily mean induction of state-of-the-art or near-state-of-the-art technology. But in the widely varying mosaic of technology obtaining in the Indian textile industry, even a significant step up from the present technology level to a substantially higher one for such trailing segments would be essential. Accordingly, technology levels are bench-marked in terms of specified machinery for each sector of the textile industry. Machinery with technology levels lower than that specified will not be permitted for funding under the TUF Scheme.

2. ELIGIBLE MACHINERY
Installation of the following types of machinery in a new unit or in an existing unit by way of replacement of existing machinery and / or expansion will be eligible for coverage under TUF scheme:-To these will be added any other machinery considered appropriate by the Technical Advisory Committee.

3. GENERAL ELIGIBILITY CONDITIONS
3.1 TYPE OF UNITS :
 

1.

2.

3.

4.

An unit can undertake one or more activities listed at I SCOPE OF THE SCHEME herein before under the scheme. However, multiple activities can be undertaken only in an integral manner, i.e. by way of forward or backward integration. It is, however, clarified that weaving/knitting and garment manufacturing or weaving / knitting and processing or garment manufacturing and processing will be considered as integral activities
 

1.

2.

However, in case of the following machinery with a minimum residual life of 10 years, import of second hand machinery by the eligible applicant unit will be permitted subject to maximum expired life (vintage) of 5 years as reckoned from the year of manufacture :-

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ix.

Rectilinear Combers for worsted system

x.

Ring Frames with siro spinning attachment with or without auto doffers for worsted system.
 

A certificate certifying the vintage and residual life of the imported second hand machinery must be furnished to the lending agency at the appropriate time as determined by the lending agency. Any of the agencies specified in Appendix-32A of the Handbook of Procedures (Volume 1) of EXIM Policy 1997-2002 (as amended from time to time) can give such a certificate. Such a certificate is compulsory for any import of eligible second hand machinery under this scheme irrespective of the value of such import. A certificate from the Textile Commissioner will also be necessary to the effect that the equipment is not indigenously available.
 

Balancing equipment or equipment required for de-bottlenecking the production process will also be eligible for funding under TUFS.

Waste reduction equipment or devices will be eligible for funding under the TUFS.

Eligibility of any other textile machinery equal to or higher than the benchmarked technology not listed in the annexures or developed in the course of the operation of TUFS will be, suo motu or on reference, specifically determined by the Technical Advisory Committee to be constituted by Government.

The size of the technologically upgraded facilities of an existing unit or size of the new unit must be of a minimum economic size.
 

The following investments will also be eligible to the extent necessary for the plant and equipment to be installed for Technology Upgradation and the total of such investments will not normally exceed 25% of the total investment in such plant and machinery. 

a.

Land and Factory building including renovation of factory building and electrical installations;

b.

Energy Saving Devices;

c.

Effluent Treatment Plant (ETP);

d.

Water Treatment Plant for captive industrial use;

e.

Captive power generation.

Investments in the installation of the following facilities including necessary equipment:-

a.

In-house R&D including designs studio;

b.

Information Technology including ERP;

c.

Total quality management including adoption of appropriate ISO/BIS standards

Investment in the acquisition of technical know how.
Lending in excess of the limits prescribed above in respect of these items will attract the normal lending rates.
 

INVESTMENT IN COMMON INFRASTRUCTURE OR FACILITIES BY AN  INDUSTRY ASSOCIATION,  TRUST OR CO-OPERATIVE SOCIETY IN AN INDUSTRIAL CLUSTER OR ESTATE

Investment in common infrastructure facilities owned by the association, trust or co-operative society of the units participating in the TUF scheme, to the extent necessary for this purpose, including the following :
1. Common utilities, viz., water supply power substation etc.
2. Common captive power generation.
3. Common effluent treatment plant.
Any additional investments would attract the normal lending rates.
 

VOLUNTARY RETIREMENT SCHEME (VRS) : 
Voluntary Retirement Scheme (VRS) for restructuring of man power of an existing unit as a part of the technology upgradation project, will be eligible for funding as a part of the project. However, interest reimbursement will not be admissible on that part of the investment.
 

SECTOR - SPECIFIC ELIGIBILITY CONDITIONS :

JUTE TEXTILES

Jute softening & carding, drawing, spinning and weaving :

i.

New machinery of eligible technology as listed in Annexure-G will be permitted.

ii.

Import of second hand machinery of eligible technology with a maximum of 5 years’ expired life (vintage) and with minimum of 10 year residual life will also be eligible subject to the conditions stipulated under para 3.2 supra.
 

Spinning and weaving/knitting of jute blends :

i.

Eligibility conditions for units spinning jute blends will be the same as for cotton spinning system detailed in para 4.2.
 

ii.

Eligibility conditions for units weaving/knitting jute blended fabrics will be the same as for non-woollen weaving and knitting as detailed in para 4.4.
 

Jute-blended garment/made-up manufacturing :

Eligibility conditions for units manufacturing jute-blended garments and/or made-ups will be the same as for non-jute garment/made-up manufacturing detailed in para 4.5
 

Processing of jute products :

i.

Processing machinery as listed in Annexure - G are eligible.

ii.

Quality control & pollution control equipment eligible for TUFS funding will also be eligible as listed in Annexure-G
 

Processing of jute-blended products :
Eligibility conditions will be the same as for processing of non-jute textile products as detailed in para 4.6.
 

Material handling :
The machinery for material handling as listed in Annexure - G are essential for modernising jute units.
 

INTERPRETATION OF ELIGIBILITY :

1.

The Government will constitute a Technical Advisory Committee with the Textile Commissioner (convenor) the Jute Commissioner and technical experts from the Textile Research Institutions (TRAs), industry and academic field covering the different segments, as members.
 

2.

If any question of interpretation or clarification is raised by the Nodal Agency as to the eligibility of any unit or machinery under the scheme, the views of the Technical Advisory Committee appointed in this behalf will be obtained.
  

1.

Under the Technology Upgradation Fund Scheme, loans will be provided subject to terms and conditions given below :
 

a.

Duration of Scheme :
 
The scheme will be in operation for the period of five years from 01-04-1999 to 31-03-2004. Loans sanctioned by the lending agency till the last date of the duration of the scheme period will be eligible under the scheme and the reimbursement would continue to be available till the same is repaid as per the normal lending period of the nodal agency. 
 

b.

Amount of loan :
 
The assistance will be need-based. There will be no minimum or maximum limit for individual loans.  
 

c.

Promoter’s contribution :
 
To be decided by the lending agency on the basis of its existing normal norms.
 

d.

Rate of Interest : 
 

i.

Rupee loan :
 
Effective rate of interest charged to the borrower concerned will be five percentage points lower than the prevailing commercial rates of interest charged by the Financial Institutions and Banks concerned; the Ministry of Textiles will reimburse the five percentage points under the scheme.
 

ii.

Foreign Currency loan :
 
As applicable for normal Foreign Currency loan. However, cover for exchange rate fluctuation not exceeding 5% p.a. would be provided under the scheme.
 

iii.

Period of interest reimbursement :
 

a.

Interest reimbursement of 5% and/or cover for exchange fluctuation upto 5% p.a. will be available during the period of loan as specified in the Letter of Intent or as may be specified in the loan document. Incase of subsequent extension of the repayment period, no reimbursement towards interest and/or exchange fluctuation will be available for the extended period.
 

b.

If an account becomes a non-performing asset (NPA), the interest reimbursement would not be available. The interest reimbursement will be available from the date of coming out of the NPA category. In default- free rescheduled cases, reimbursement will be as per the original repayment schedule.
 

c.

Other conditions, viz., period of loan, security, conversion option, Debt-Equity-Ratio etc.
Eligible units will be of minimum economic size. Others conditions will be such as determined by the lending agency as per its existing normal norms.
  

MANAGEMENT 
 
One of the main requirements for sanction of assistance under the TUF Scheme will be the availability of competent management to the unit concerned to carry out the modernization programme and also to manage the operations of the unit efficiently. Towards this end, lending Agencies may stipulate conditions relating to broad-basing of the Board, appointment of senior technical/financial executives, professionalisation of the management and constitution of such committees as may be considered necessary.
 

WORKING CAPITAL REQUIREMENTS
 
Since the success of the modernisation programme would, to a large extent, depend upon the availability of adequate working capital to achieve the full benefit of the modernisation programme, the units have to make adequate arrangements with their bankers for meeting working capital requirements. 
 

The nodal agencies may co-opt other All India Financial Institutions (AIFIs)/ state financial corporations (SFCs)/ state industrial development corporations (SIDCs) and commercial/co-operative banks in the scheme for sanction and disbursement of loan so as to have a better reach. However, there will be no erosion in the rate of the interest reimbursement available to the borrower on account of such linkages.

Applications for assistance under the Fund Scheme may be submitted in the prescribed form available from the concerned nodal agencies or co-opted AIFIs/SFCs/SIDCs/ commercial/co-operative banks, as the case may be.
 

The nodal agencies will furnish periodically information in respect of sanction and disbursement of the loans and other related information to the Textile Commissioner. Such information in respect of the co-opted AIFIs/ SFCs / SIDCs/ commercial/co-operative banks will be co-ordinated and furnished by the nodal agency concerned to the Textile Commissioner.
 

The procedure for the disbursement of the interest reimbursement to the nodal agencies will be decided by the Ministry of Textiles in consultation with the Ministry of Finance.
 

In respect of the co-opted financing institutions, nodal agencies will be responsible for verifying the interest reimbursement claims of the co-opted AIFIs/SFCs, SIDCs and commercial/co-operative banks and actual disbursement thereof.
 

MONITORING/APPRAISAL MECHANISM
 
The Inter-ministerial Steering Committee under the Chairmanship of Secretary (Textiles) will lay down norms for a monitoring and appraisal mechanism for effective implementation of the scheme and may set up an appropriate machinery therefore. The Steering Committee would also periodically review the functioning of the scheme.