The subsidy will be funded through surcharge on the basic excise duty on textiles, according to BC Khatua, textile commissioner. The total TUF is estimated to be around Rs 25,000 crore.

As it is there is a 15 per cent surcharge on the basic excise duty levied on textile goods since 1978 which was introduced to fund Janata Cloth scheme. Earlier the collection of this surcharge matched the expenses of the scheme. However, with the Janata Cloth scheme being phased out, the expenditure is merely Rs 50 crore, while the collection through 15 per cent surcharge is over Rs 600 crore.

There will be no more expenditure on this scheme in the next two years or so. It is this collection of additional excise levied on the textiles that would fund the long overdue technological upgradation of the industry. But will the industry be able to bear the brunt of this additional duty? "Yes, it is agreeable to the industry" says Khatua. No additional burden is being placed on the industry since the same surcharge would continue. Only the use of funds will be for a different purpose.

At the current level of collection of around Rs 600 crore annually through the additional levy, the government can garner at least Rs 3,000 crore over the next five years which it has earmarked toward payments of the interest subsidy on the loans given to the sector.

The financial institutions have agreed to fund the TUF whose size will be determined by the capacity and requirement of the textile industry for funds at reduced interest rates. The IDBI will fund mainly the investments in the organised mill sector, while the IFCI will provide funds to the powerloom sector. Nabard and Sidbi will fund smaller investments of other textile mills sectors.