The Indian textile mills who had made investment for upgrading technology at their existing units as well as to set up new units with state-of-the-art facilities under the Technology Upgradation Fund Scheme (TUFS) more than three years back are looking for subsidy release now which according to them is worth Rs 2,500-3,000 crore.

The amount is due because of non-payment of subsidies against investments made by textile units during the so-called black-out period (June 20, 2010 to April 27, 2011) as well as errors in reporting of the dole-out amount by banks to the textile commissioner, sources told FE.

The black-out period refers to the time when the government had halted subsidy payment temporarily, seeking to change the contours of the TUFS from an open-ended scheme to a close-ended one and announced the introduction of the revised scheme only from April 2011.

The government has set up an inter-ministerial steering committee to look into this issue. The committee is headed by textile minister Santosh Kumar Gangwar, which will soon finalize a consultant to accurately calculate the subsidy amount to be paid, although mills estimate the subsidy dues to be a maximum of Rs 3,000 crore. Once the consultant submits its report, the panel will consider it before placing a final proposal for the clearance by the Cabinet Committee on Economic Affairs.

The government mainly provides interest subsidy against loans to units, capital subsidy and limited cushion against exchange rate fluctuation for investing in new technology.

The TUFS was introduced in 1999 to make available funds to the the textile industry for upgrading technology at existing units as well as to set up new units with state-of-the-art facilities so that its viability and competitiveness in the domestic as well as international markets would enhance.

Due to the non-payment of subsidy amount for earlier investments and poor demand textile mills are facing cash crunch hence looking for the release of subsidies.

During the current plan period, the government has targeted to attract investments worth Rs 1,51,000 crore through the TUFS scheme. Budget 2013-14 had announced the continuation of the TUFS during the 12th Plan period through 2017 with a subsidy allocation of Rs 11,952 crore.