Textile manufacturers have urged the Union Government to structure the newly announced Capital Support Scheme (CSS) as a credit-linked subsidy for machinery purchases, arguing that such a framework would be more effective in driving modernisation and long-term competitiveness across the sector.
The CSS, announced in the Union Budget for 2026–27, is intended to encourage production and employment in the textile industry through capital support. The government has said it will constitute a committee comprising subject-matter experts and representatives from industry associations to frame detailed guidelines for the implementation of the scheme, including the mechanism for extending subsidies.
Industry stakeholders have drawn comparisons with the earlier Technology Upgradation Fund Scheme (TUFS), which was implemented from 1999 until 2022. Under TUFS, the government provided a credit-linked capital investment subsidy of 15% to support the modernisation of textile, garment and technical textile manufacturing. The subsidy was capped at Rs. 30 crore (US $ 3.31 million) for garments and technical textiles and Rs. 20 crore (US $ 2.21 million) for other textile segments, and was primarily used to facilitate machinery purchases.
Industrialists have pointed out that subsidies worth more than Rs. 8,000 crore (US $ 883 million) under TUFS are still pending for companies that had already applied before the scheme ended. Textile manufacturers from Coimbatore have been particularly vocal in calling for a new capital-based subsidy scheme to revive investment momentum in the sector.
A textile manufacturer from Coimbatore said that investments of more than Rs. 4 lakh crore (US $ 44.20 billion) were made in machinery between 1999 and 2022, with the Union Government earmarking around Rs. 35,000 crore (US $ 3.86 billion) in subsidies under TUFS, which significantly boosted modernisation. He noted that high interest rates and long payback periods continued to pose major challenges for industries seeking to invest in advanced machinery, adding that while the introduction of CSS reflected the government’s acknowledgement of these concerns, a production-linked or employment-linked subsidy would be less effective than a credit-linked model.
The same industry representative said manufacturers would press for a credit-linked subsidy for machinery purchases during discussions of the proposed committee, arguing that such an approach would directly address financing constraints faced by textile units.
He further stated that extending capital support to textile engineering and machinery manufacturers would make domestically produced equipment more competitive, enabling textile companies to procure machinery at more competitive prices. According to him, this approach would deliver greater benefits to the industry compared with subsidies linked solely to production volumes or employment generation.
