The Indian textile industry has asked the commerce ministry not to exclude textile units that had availed funds for modernizing their units under the Technology Upgradation Fund Scheme (Tufs) from benefiting from the new scheme for importing capital goods duty free. The zero duty EPCG scheme, announced in this year’s foreign trade policy, allows exporters in a number of identified sectors including textiles, to import capital goods at zero duty for personal use.

In a report submitted to the commerce ministry, textile exporters’ body Confederation of Indian Textile Industry (CITI) pointed out that the exclusion clause in the FTP, barring units availing benefits under Tufs to also avail of the zero-duty EPCG scheme, should be removed.

The industry argument is that since most of the small and medium units, which were suffering most from the on-going global slow down, had availed benefits under TUFS, the exclusion clause will prevent them from taking advantage of the additional benefits offered by the government.

Most of the exporting units in the textile and clothing sector have availed of TUFS and therefore this benefit under the EPCG scheme will be specifically denied to a large number of players in this industry,” said R K Dalmia, chairman, CITI.

The report has also opposed exclusion of TUFS beneficiaries from benefiting from the additional duty free scraps (1% of the export value) allowed for status holders (also announced in the FTP). The scripts are certificates which can be used for importing goods duty free and are transferable.

Under Tufs, textile units get a 5% rebate on the interest payable on loans for modernization and technological upgradation. However, the report stated that even after Tufs benefits, interest rates for the textile and clothing industry of India is higher than what is prevailing in most of the competing countries. Customs duty on import of machines or duty free scripts for status holders have nothing to do with interest rates on capital.