Government of India 
Ministry of Textiles
Office of The Textile Commissioner
Post Bag No. 11500 : MumbaI - 400 020
Fax : 022-200 24 95 : E-mail : texcomindia@ermiul.bom.nic.in
No. 28(19)/2000-MS/116 Date : 19.02.2002 

Circular No. 6
 (2001-2002 Series)

Sub: Upgradation Fund Scheme (CLCS-TUFS) for Small Scale Textile and Jute
Industries as approved by IMSC in its 11^th meeting held on 15^th Feb.,2002.

1)Government has decided to provide an option to the Small Scale Textile and Jute Industries to avail of either 12% Credit Linked Capital Subsidy or the existing 5% interest reimbursement under the Technology Upgradation Fund Scheme (TUFS)

2)The proposed option would be extended to the small scale Textile and Jute industries of the following segments, which are already covered under TUFS, viz:

a)Cotton ginning and pressing

b) Textile industry covering:-

i) Silk reeling and twisting
ii) Wool scouring and combing
iii) Synthetic filament yarn texturising, crimping and twisting.
iv) Spinning.
v) Viscose Filament Yarn (VFY) and Viscose Staple Fibre (VSF)
vi) Weaving , Knitting including non-wovens, fabric embroidery and   technical textiles.
vii) Garment/made-up manufacturing
viii) Processing of fibres, yarns, fabrics, garments and made-ups

c) Jute industry

3) CLCS-TUFS will be in operation from 1^st January 2002 to March 31, 2004. The loan sanctioned by the nodal agencies/co-opted PLIs till the last date of duration of the scheme will be eligible for availing of 12% capital subsidy.

4) Technology and other norms of TUFS are equally applicable to CLCS-TUFS cases for determining the eligibility under the scheme.

5) Subject to the norms prescribed under TUFS, the definition of Small Scale Industry for the Textile and Jute sectors, would be as defined by the Department of Industrial Policy and promotion, Ministry of Commerce and Industry, Government of India, for such small scale Industries. However, SSI registration is not a pre-requisite for availing of assistance under CLCS-TUFS.

6 ) Capital Subsidy under the CLS-TUFS shall be available only for such projects where term loans have been sanctioned by the nodal agencies and its co-opted Primary Lending Institutions (PLIs).

7) The 12% Capital subsidy will be worked out on the eligible investment amount under TUFS and would be released to the beneficiary unit on pro-rata basis along with disbursement of loan sanctioned for technology upgradation. A hypothetical example of M/s. ABC Ltd., for working out the capital subsidy is given below:

M/s. ABC Ltd.
(Rs. in lakh)

8) To prevent misutilisation of capital subsidy and to provide an incentive for repayment, the capital subsidy will be treated as a non-interest bearing term loan by the bank/FIs. The repayment schedule of the term loan however will be worked out excluding the subsidy amount and subsidy will be adjusted against the term loan account of the beneficiary after a lock in period of three years on a pro-rata basis in terms of release of capital subsidy. There is no apparent or real financial loss to the borrower since the countervailing concession is extended to the loan amount.

9) It is expected that a industrial unit availing of Capital subsidy should atleast function for a minimum period of three years from the date of disbursement of capital subsidy. In case unit goes out of production prior to lock in period of three years (except in cases where the unit remains out of production for short period, not exceeding three months due to causes beyond its control such as shortage of raw material, power etc.), the industrial unit shall be liable to refund to the Government Capital Subsidy availed of along with interest to be charged from the date of disbursal to the date of refund. The rate of interest shall be the prime lending rate of PLI concerned at the time of invoking this penal clause. The bank/FI will take all necessary steps to recover the capital subsidy and interest thereto from the industrial unit and refund the same to the Govt.

10) In case it is found that Capital Subsidy from the Government has been availed of on the basis of any false information, the industrial unit shall be liable to refund the Government Capital Subsidy availed of along with interest to be charged from the date of disbursal to the date of refund. The rate of interest shall be the prime landing rate of PLIs concerned at the time of invoking this penal clause. The bank/FI will take all necessary steps to recover the capital subsidy and interest thereto from the industrial unit and refund the same to the Govt.

11)All the co-opted PLIs will have to execute a General Agreement with SIDBI for availing of capital subsidy under the scheme, irrespective of the fact whether re-finance from SIDBI is availed of by them or not.

12) After sanction of the assistance, eligible PLIs will get an Agreement executed by the small scale unit concerned on behalf of Government of India.

13) For the purpose of releasing capital subsidy on due dates, funds in the nature of advance money would be placed by the nodal agencies with the PLIs. The quantum of such advance money would be arrived at based on the subsidy forecast to be submitted by the PLIs, on quarterly basis to SIDBI/IFCI. The replenishment of funds to the PLIs would depend on the utilisation of funds released earlier. In other words, advance money would be replenished, after adjusting the balance amount, if any, with the PLI concerned at the end of each quarter. It will be the responsibility of H.O. of each PLI to ensure that the subsidy amount is released as per the guidelines under the scheme and furnish a certificate to the effect, before seeking replenishment of funds. Further, the PLIs will have to indicate the name of a nodal officer, who will coordinate release of subsidy and also arrange to furnish data invariably on quarterly basis to SIDBI/IFCI. The SIDBI/IFCI will issue the necessary guidelines to their co-opted PLIs in this regard.

( Smt Shashi Singh)
( Director)