INDIA: Spindle Capacity Norm Curbs SSI Units From Accessing TUFS Funds

COIMBATORE: The minimum spindle capacity norm set for availing the concessional project financing under the Union Government sponsored technology upgradation fund scheme (TUFS) has kept most small-scale textile spinners practically outside the purview of the TUFS.

This is because the minimum economic scale stipulated for a unit at 12,000 spindles to qualify for the TUFS funding is unrealistic in the present day market-oriented manufacture, according to the SSI spinners.

If viability is the determining factor in extending the TUFS benefit, then the minimum spindle restriction should give way as many small units fitted with 6,000 spindle frames or even below that have proved profitable in the market place. "Then why deprive such viable spindleage of competitive funding under the TUFS by citing the spindle-capacity norm," asks Mr A.V. Ramaraj, a member of the South India Small Spinners' Association (Sisspa).

He said that eight years of ills in the textile industry, including the organised textile mills had reflected in the form of `poor balance sheet'. This has been largely on account of severe liquidity crunch faced by them in the market place.

This syndrome could not in any way be linked to `minimum spindle capacity' norm as the market had seen during this period many units that had been working with less than 12,000 spindles or even below 6,000 performing well and earning profits.

He said out of Rs 1,300 crore or so estimated to have been disbursed as loan under TUFS to the Tamil Nadu-based textile industry, hardly some Rs 50 crore were only given to the small-scale spinning mills and most of the SSI spinners could not access the TUFS funds due to the restriction.

With the deadline for the dismantling of the global textile quota system hardly eight months away and the ensuing free market regime demanding greater competitiveness, it would be unwise for the Centre to continue to stick to such spindle capacity-based eligibility norm for allowing modernisation fund under the TUFS.

Right now, according to Mr Ramaraj, many of such viable small-scale units continue to upgrade their production system by installing newer frames through either international source or fund mopped outside the purview of the TUFS.

Source: Business Line

April 10, 2004

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Added: April 10, 2004
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