Technology Upgradation Fund Scheme (TUFS) which was introduced in 1999 to catalyze investments in all the sub sectors of textiles industry by way of interest reimbursement. The scheme mainly focuses on modernization of processing, spinning, and weaving, garmenting and technical textiles segments, where there is good scope for massive employment generation and value-addition.

The textile ministry is now mulling over a proposal to restructure the textile upgrade fund (TUF) for making it broad based to include many more areas and make better benefits under the new textile policy proposed.

Some of the proposals include relaxation in the terms and conditions on the loan, increasing the assistance to upgrade plain looms into shuttle less looms, weaving preparatory, knitting machines, ginning and pressing machine to be earmarked to avail benefits, extending the subsidy to imported machinery and enhancing the margin money subsidy under the scheme.

As per the proposal, borrowers will get effective rate from the beginning and the financial institutions will take reimbursement from the Ministry for the interest subsidy involved. Besides, the loan repayment period should be extended to 2 years of moratorium and seven years of repayment.

Under TUF, 10% capital subsidy (in addition to five% interest re-imbursement) is proposed to be provided on imported machinery which is not manufactured in India for manufacturing silk and woolen items.

Besides, assistance for converting existing plain looms/ semi-auto looms into rapier Shuttle-less loom should be increased to Rs. 35,000 per loom.

A pilot project has been envisaged under the power loom sector which aims at providing subsidy for developing infrastructure, common facilities, and construction of factory buildings and for shuttle less looms on Hire purchase basis, to improve their quality and production and to face the competition from domestic market as well as export market .

An allocation of Rs. 2300 crores has been made under this scheme in 2014-15 out of which Rs 528 crore has been disbursed till July 31, 2014.

Under the margin money subsidy (MMS) under TUFS, the small scale textile and jute units can avail 15% MMS instead of five percent on interest repayment. MMS is available on 15% investment made in TUF compatible machinery subject to a ceiling of Rs. 75 lakh on subsidy amount.

During the 12th Five Year Plan the major focus of TUF would be on modernization of power loom sector.

Among other changes made are augmentations of capital Subsidy for new shuttle less looms from 10 to 15%, increasing the rate of interest reimbursement from 5% to 6%. Further, the Margin Money Subsidy has been increased from 20% to 30% with an increase in subsidy capital from Rs 1 crore to Rs 1.5 crore.

Since inception, the scheme has propelled investment of more than Rs. 2, 60,000 crore till date and an amount of Rs 18,600 crore has been released towards subsidy under the scheme upto 31.07.2014.