Reporting by Aniruddha Basu; Editing by Ramya Venugopal

Reuters, Thu Feb 11, 2010

Utilisation levels are high and given the growth in domestic consumption it would be very encouraging if the allocation under TUFS is increased as textile makers are investing more," said Sunil Khandelwal, Chief Financial Officer at Alok Industries Ltd.

The textile industry had been battered by the economic slowdown for much of 2008/09 but has begun to recover in the past 2-3 quarters with major textile firms such as Alok Industries, Raymond and Century Textiles & Industries Ltd reporting higher sales and profits in Oct-Dec.

But analysts said that the government needs to quicken disbursement of funds as there was no clarity on how soon a unit can receive the funds under TUFS, which is essentially a low interest-rate loan.

"TUFS is not a grant, the interest waiver is what you are getting. A fundamental issue is to see how the funding is disbursed and how long it takes for the units to get the waiver," said Devangshu Dutta, chief executive, Third Eyesight, a textile consultancy.

The industry has also asked for removal of duties on man made fibres to increase utilisation in the country, CITI said in a statement.

Currently there is a ratio of 62:38 in the utilization of cotton and man-made fibres in the country, as against the global ratio of 40:60, it said.

VALUE ADDITION

Excise duty on man-made fibres had been increased from 4 percent to 8 percent in the last annual budget.

The industry has also asked that liquid fuels used by textile and clothing units for captive power generation be exempted from duties to encourage them to cut energy costs, said D.K. Nair, secretary general of CITI.

"The thought process needs to be on value addition rather than capturing percentages of low value items," Third Eyesight's Dutta said.

Industry participants are also asking that export credit for textile and clothing units be provided at a uniform rate of 5 percent interest. Export credit is currently provided at about 8 percent interest.

"They may get more export benefits, but I don't expect any major stimulus to be given this time. Overall the budget would be slightly conservative or negative," said an analyst from a Mumbai brokerage who declined to be named.

The budget will be presented on Feb 26.