CONCEPT NOTE

COMMERCIALIZATION & POLICY SUPPORT FOR ‘INDIGENOUS

TEXTILE MACHINES’ TO SUBSTITUTE HUGE IMPORTS UNDER
‘MAKE IN INDIA’ CAMPAIGN

SUBMITTED TO

MINISTRY OF TEXTILES, GOVENRMENT OF INDIA

UDYOG BHAVAN, RAFI AHMAD KIDWAI MARG, NEW DELHI – 110011

SUBMITTED BY [17TH JANUARY 2019]

TEXTILE MACHINERY MANUFACTURERS’ ASSOCIATION (INDIA)

53, MITTAL CHAMBERS, NARIMAN POINT, MUMBAI – 400021
Tele-fax: 022- 22028017 Website: www.tmmaindia.net Contact: [email protected] (9342592520)
Table of Contents
1.0 EXECUTIVE SUMMARY ............................................................................................................... 4
1.1 Low Hanging Fruits: ...................................................................................................................... 5
1.2 Why Commercialization & Policy Support: ................................................................................. 6
2.0 STATUS OF TEXTILE ENGINEERING INDUSTRY (TEI) IN INDIA ................................................... 8
2.1 Technology Gap Analysis: ............................................................................................................ 8
2.2 TEI – Sectoral View as per Gherzi Report in 2011: ...................................................................... 9
2.3 Mapping of Indian Technology Level:........................................................................................ 10
3.0 HUGE IMPORTS WHICH SHOULD BE SUBSTITUTED UNDER ‘MAKE IN INDIA’ ....................... 12
4.0 TEI – POLICY SUGGESTIONS IN 12th FIVE YEAR PLAN .............................................................. 13
4.1 TEI Projects Under CG Scheme of DHI: ...................................................................................... 13
5.0 NEED FOR COMMERCIALIZATION & PROMOTIONAL SUPPORT ............................................. 14
5.1 Commercialization Support ....................................................................................................... 14
5.2 Promotional Support.................................................................................................................. 15
6.0 SHORT TERM: 3 INDIGENOUS TECHNOLOGIES FOR IMMEDIATE COMMERCIALIZATION ..... 16
7.0 VERTICAL EMBROIDERY MACHINE (VEM) ............................................................................... 17
7.1 The Embroidery Machinery Market .......................................................................................... 17
7.2 Nantex’s VEM: Potential & Challenges ...................................................................................... 17
7.3 VEM Vs. Existing Technologies................................................................................................... 19
7.4 Product Videos ........................................................................................................................... 19
7.5 Other Concerns: Brand, Unit Cost & Patent .............................................................................. 20
7.6 Solution: Financial ...................................................................................................................... 21
7.7 Commercialization of VEM: Plan of Action ............................................................................... 22
7.8 Positive Outcomes of Nantex’s Efforts So Far ........................................................................... 23
7.9 R&D Recognition for VEM: ......................................................................................................... 24
8.0 HI-SPEED CIRCULAR-WEFT KNITTING MACHINE (HSCK) ......................................................... 25
8.1 The Knitting Machinery Market ................................................................................................. 25
8.2 Hi-Tech’s HSCK: Potential & Challenges .................................................................................... 25
8.3 HSCK - Technical Specification ................................................................................................... 27
8.4 HSCK: Technology Parameters Compared ................................................................................. 28
8.5 Product Videos: .......................................................................................................................... 28
8.6 Other Concerns: Brand, Unit Cost & Patent .............................................................................. 29
8.7 Solution: Financial ...................................................................................................................... 30
8.8 Commercialization of HSCK: Plan of Action .............................................................................. 31
8.9 Positive Outcomes of Hi-Tech’s Efforts so Far:.......................................................................... 31
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9.0 HI-SPEED SHUTTLE-LESS RAPIER LOOM (HSRL) ....................................................................... 32
9.1 The Rapier Loom Market ........................................................................................................... 32
9.2 TMMC’s Rapier Weaving Loom: Potential & Challenges .......................................................... 32
9.3 HSRL’s Technical Specification ................................................................................................... 34
9.4 Other Concerns: Brand, Unit Cost & Patent .............................................................................. 35
9.5 Solution: Financial ...................................................................................................................... 36
9.6 Commercialization of HSRL: Plan of Action ............................................................................... 37
9.7 Positive Outcomes of TMMC’s Efforts So Far ............................................................................ 38
9.8 Consolidated Fiscal Incentives Sought to Commercialize 3 Indigenous Technologies ............ 39
9.9 Suggested Threshold & Mechanism .......................................................................................... 39
10.0 MEDIUM TERM: 2 GLOBAL TECHNOLOGIES FOR COMMERCIALIZATION............................... 40
11.0 SPINNING-AUTOMATIC CONE WINDING MACHINE/AUTO-CONOERS/ LINK-CONERS .......... 41
11.1 Indigenous manufacturing of Automatic Cone Winders would give following advantages . 41
11.2 Other Concerns:........................................................................................................................ 43
11.3 Solution: Financial .................................................................................................................... 44
12.0 PROCESSING-SUSTAINABLE & SMART MACHINES .................................................................. 45
12.1 Smart Textile Processing Market ............................................................................................. 45
12.2 Other Concerns: Brand, Unit Cost & Patent ............................................................................ 47
12.3 Solution: Financial .................................................................................................................... 47
12.4 Consolidated Fiscal Incentives Sought to Commercialize 2 Global Technologies .................. 48
12.5 Government Initiatives: Joint Ventures & or Foreign Direct Investment in TEI for MII ........ 49
13.0 LONG TERM: 5 CEFCs & 2 COEs- R&D, SKILL DEVELOPMENT & CAPACITY BUILDING............ 50
13.1 Five Common Engineering Facility Centers (CEFCs): ............................................................... 50
13.2 Two Center of Excellences (CoEs): ........................................................................................... 51
14.0 POLICY SUPPORT ...................................................................................................................... 52
14.1 Government Policy ................................................................................................................... 52
14.2 FDI promotion and acquisition of technical knowhow: .......................................................... 56

List of Annexures
ANNEXURE 1- EXPORTS OF INDIAN TEI ............................................................................................... 57
ANNEXURE 2- PREVAILING CUSTOMS DUTY & INDUSTRY RECOMMENDATIONS ............................. 58
ANNEXURE 3-GUIDELINES FOR APPROVAL OF IN-HOUSE R&D CENTRES- DSIR U/S 35(2AB) ........... 66
ANNEXURE 4- EXTENT OF TARIFF EXEMPTION ON IMPORTS FROM DIFFERENT COUNTRIES ........... 69
ANNEXURE 5- IMPACT OF TUF SUBSIDY ON USED LOOMS IMPORT (BEFORE & AFTER)................... 71
ANNEXURE 6- EPCG SCHEME – CHAPTER 5- FTP 2015-20 ................................................................... 72
ANNEXURE 7- DEEMED EXPORTS – CHAPTER 7- FTP 2015-20 ............................................................ 80

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List of Tables
Table 1.1: Implementation Strategy for GoS Recommendations ......................................................... 4
Table 1.2: Top 5 Textile Machinery Technology Import & Source Countries ....................................... 5
Table 1.3: Consolidated Commercialization Grant & Incentives Sought for 5 Technologies .............. 7
Table 2.1: TEI – Sectoral View- Gherzi Report ....................................................................................... 9
Table 2.2: Mapping of Indian TEI Level ................................................................................................ 10
Table 3.1: Top 5 Imports of Textile Machine Technologies that Can be Substituted ........................ 12
Table 5.1: Proposed Budget Outlay for ‘Make in India’ & ‘Globalizing’ these Technologies ............ 14
Table 6.1: Indian Vs Foreign Technology – Cost Comparison & Import Value ................................... 16
Table 7.1: Technology Comparison- VEM Vs. Existing ........................................................................ 19
Table 7.2: Commercialization of VEM: Plan of Action ........................................................................ 22
Table 8.1: HSCK-Machine Models ........................................................................................................ 27
Table 8.2: HSCK- Performance Comparison with Foreign Machines .................................................. 28
Table 8.3: Commercialization of HSCK: Plan of Action ....................................................................... 31
Table 9.1: HSRL-Technical Specifications............................................................................................. 34
Table 9.2: Commercialization of HSRL: Plan of Action ........................................................................ 37
Table 9.3: Consolidated Fiscal Incentives to Commercialize 3 Indigenous Technologies .................. 39
Table 11.1: Import Duty Structure on Critical Components ............................................................... 43
Table 11.2: CG Utilization Break-up ..................................................................................................... 44
Table 11.3: TAI Utilization Break-up .................................................................................................... 44
Table 12.1: Consolidated Fiscal Incentives Sought to Commercialize 2 Global Technologies ........... 48
Table 12.2: List of Japanese & Indian Companies for Potential JVs under Make in India ................. 49
Table 13.1: Location of 3 CEFCs in Major Textile Clusters in India ..................................................... 50
Table 13.2: Locations of 2 other CEFCs in India ................................................................................... 51
Table 13.3: Additional Locations of 2 CEFCs in India........................................................................... 51
Table 14.1: List of Critical Components Exempted from Import Duty ............................................... 52
Table 14.2: EPCG Scheme - Good Objective with Bottlenecks ........................................................... 54

List of Images
Image 7.1: VEM-Machine’s Images & Schematics .............................................................................. 18
Image 7.2: Garments & Home Furnishing Products Made on VEM ................................................... 18
Image 7.3: VEM-Testimonials .............................................................................................................. 23
Image 7.4: VEM-Innotex 2018- Presentation & Awards ..................................................................... 24
Image 8.1: HSCK-Machine & Product .................................................................................................. 26
Image 8.2: Different Types of Fabric Produced on HSCK Machine ..................................................... 26
Image 9.1: HSRL-Machine Images & Schematics................................................................................. 33
Image 9.2: Different Types of Fabric Produced on HSRL..................................................................... 33
Image 9.3: Used Machines’ e-Sales Portals-
https://dir.indiamart.com/search.mp?ss=used+rapier+loom+sigma .................................................. 35
Image 9.4: HSRL-Recognition Among Top 10 Innovations at Innotex 2018 ....................................... 38
Image 11.1: Autowinders at a Spinning Mill ....................................................................................... 42
Image 11.2: Autowinders- Product Images ......................................................................................... 42
Image 12.1: Smart Processing Machines-Concept of the Product...................................................... 46

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 1.0 EXECUTIVE SUMMARY

In compliance with the decision taken in the review meeting chaired by the Honourable Prime
Minister on 07.06.2018, a Group of Secretaries (GoS) was constituted to deliberate and
formulate an action plan for the development of Textile Machinery and Man-Made Fibre
(MMF) industry. After thorough deliberations with GoS, the Ministry of Textiles (MoT) issued
an office memorandum F.No.23/01/2018-TUFS dated 31st July 2018, citing these following
GoS recommendations.

1. Establishment of 2 CoEs (Knitting, Weaving, Garmenting & other identified gaps

2. Establishment of 5 CEFCs (Greenfield & Brownfield)
3. Capacity building programmes in textile machinery (basic & advanced skill development)
4. Phased manufacturing programme to promote local content through Public Procurement
Policy (Preference to MII Order)
5. Identification of critical parts & components used for manufacturing of textile machinery
& reduction of import duty on them
6. Incentivize domestic manufacturing of textile machinery- preferential treatment for local
content in textile machinery under TUFS

These recommendations can be implemented as short term to long term goals.

Table 1.1: Implementation Strategy for GoS Recommendations

Goal Recommendation Suggested Strategy

Time Execution by Budget
Number (months) Outlay
Short 3rd, 4th, 5th, & 6th
3 Indigenous technologies for 6-12 MoT with INR 282
term with policy
immediate commercialization DHI & Crores
support (Weaving Embroidery, & TMMA’s
Knitting) Support
Medium 2 Global technologies for 12-24 INR 468
term commercialization (Spinning & Crores*
Processing)
Long 1st, 2nd & 3rd with 2 COE’s & 5 CEFC’s for R&D, 12-48 MoT+MHI INR 400
term Policy support skill development & capacity with TMMA’s Crores
building Support
*Expenses of Rs. 15.0 Crores for ‘Export Promotion, Market Research & Support to Industry Associations’ included-mentioned in Table 1.3

This ‘Concept Note’ elaborates strategies to achieve the Short-Term & Medium-Term Goals
in reference to the 3rd to 6th recommendations mentioned above, whereas it gives
suggestions in brief to achieve the Long-Term Goals towards the end of this document.

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1.1 Low Hanging Fruits:

In this regard, a number of meetings and consultations were held in the last few months,
under the aegis of Ministry of Textiles and Ministry of Heavy Industry. In a recently held
meeting under the Chairmanship of the Secretary-MoT, on 7th December 2018, the Textile
Machinery Manufacturers’ Association (I) suggested 5 key textile machinery technologies in
which the imports were reported to be the highest (~INR 4500 crore/year), and there is high
possibility of substituting these imports from the indigenous technology solutions itself.

Table 1.2: Top 5 Textile Machinery Technology Import & Source Countries

Import
SN Machine Type-Segment Source of Import (Country)
(INR Crore)
Spinning Machine - Spinning (8445)
1 900 Germany, Japan, Italy
(Auto-winders/ Auto-coners)
Weaving Looms - Weaving (8446)
2 1000 Belgium, Italy, Japan, China
(Rapier, Airjet, & Waterjet)
Knitting Machines - Garmenting (8447) Germany, Korea, Taiwan, Japan,
3 1500
(High Speed Circular & Warp Knitting) China
Embroidery Machines - Garmenting (8447) Germany, Switzerland, Japan,
4 1100
(Horizontal & Multi-heads) China
Processing Machines - Processing (8451) Switzerland, China, Germany,
5 1000
(Drying, Dyeing & Bleaching) Italy
(Average Import Figures taken
TOTAL (INR Crore) 6500
from 2014-15 to 2016-17)

Out of these 5 technologies, 4 technologies (Hi-speed Rapier Weaving Loom, Vertical

Embroidery Machine, Hi-speed Circular & Warp Knitting Machines, and Processing Machines)
have been developed by the domestic industry. The 5th technology (Auto-winders) can be
adopted from overseas. All these technologies have huge potential for supplying machines to
the domestic as well as the overseas markets.

Recently, the technologies of Weaving Loom and Embroidery Machines were recognized
among the Top 10 innovations of the year on a national platform ‘Innotex 2018’, organized
by the ‘Confederation of Indian Textile Industry (CITI)’. Especially, the Vertical Embroidery
Machine developed by Nantex Machineries Pvt. Ltd. (Gurgaon) was adjudged the 2 nd
Runner Up of these awards. Another manufacturer from Ludhiana, ‘Hi-tech International’ has
developed ‘Hi-speed circular & warp knitting machines for the garmenting industries. These
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technologies have garnered much needed valuable recognition and appreciation by the
textile industry, academia, and the media through this platform.

A consortium of 5 Indian Loom Manufacturers has developed a ‘Hi Speed Shuttle-less Rapier
Loom (450 rpm)’ at CMTI Bangalore, under DHI’s CG scheme. It has come to a stage where
the machine is undergoing trials in actual mill condition in Surat for 3 months. Its commercial
success in the market shall decide the future R&D of a 600rpm version of the loom in the
second phase of the project.

Another Indian manufacturer, the ‘Dhall Enterprises’ from Ahmedabad has researched &
developed through global partnerships on their own some unique ‘Textile Processing
Machines’ that makes the Yarn & Fabric processing more cost effective, eco-friendly, energy
friendly, and user interactive. This is one of the advanced textile processing technologies in
the world that can be customised to the Indian user industry’s requirements, and can also be
exported in the overseas markets. Besides some foreign companies such as ‘EMS Global’ from
Turkey also wishes to bring similar technologies into India to make these machines in India.

Apart from these the Autowinders (Spinning) can also be ‘Made in India’. Currently, there are
only 3 manufacturers of the Autowinders in the world i.e. Savio (Italy), Murata (Japan) and
Schlafhoerst (Germany), who sell it globally from their respective manufacturing bases in the
home countries. India imports Autowinders worth INR 900 crores every year. Only Savio has
an Indian subsidiary which makes other spinning machines such as TFOs etc. They have shown
interest in bringing this technology to India, provided they can also be given some
commercialization support.

1.2 Why Commercialization & Policy Support:

Having sprung out of years of domestic R&D efforts, these technologies need initial nurturing
and financial support in getting commercialized successfully into the domestic market, which
currently is heavily dependent on imports. Global Brand vs Local Brand perception is also one
among the major speed breakers in getting these technologies being adequately accepted by
the domestic market in the shortest possible time frame. Whereas the technology developers

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have ensured the global quality standards of textile production outputs from their machines,
the costs also of these machines have also come out to be equivalent to any good European
machine. At the same time the machines from China are available at throwaway prices
depending upon the quality. At large, Indian machines lie between European and Chinese
machines in terms of Quality & Price.

In a nutshell, the Indian textile industry wants to buy the technology which has the quality of
highest European Standard and the price of the lowest Chinese Bidder.

Hence, TMMA proposes to the MoT for considering a one-time ‘Commercialization Grant’ (30% of
the technology cost), and a ‘Technology Adoption Incentive’ (18% or 30% of each machine cost) for
the first 1000 machines sold in the Indian and or the overseas markets, exclusively for the
technology owners. This will enable them to develop their manufacturing capabilities, enhance their
marketing and branding efforts, and most importantly reduce the cost of their machines to a level
that matches with that of their Chinese counterparts.

Table 1.3: Consolidated Commercialization Grant & Incentives Sought for 5 Technologies

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2.0 STATUS OF TEXTILE ENGINEERING INDUSTRY (TEI) IN INDIA

The Textile Engineering Industry (TEI) in India is one of the five key capital goods industries
that consists of more than 3000 units*. The industry has more than 80% of the units as SMEs
with a total investment of Rs.9,500 Crore and capacity of Rs. 11000 Cr. It provides direct &
indirect employment to more than 3,00,000* people in the country. At the moment the
industry meets 45-50%* of the demand of the Indian textile industry. The projected growth
of TEI by 2018-19 is estimated to be Rs.15,000 Cr from Rs.7500 Cr in 2013-14.

[*TMMA (I) Estimates based on the industry data analysis, market study, stakeholder consultations & TEI Census 2008-09]

A good number of firms are of international standard in terms of product design, capacity and
technology. The SMEs have developed their products by indigenizing technology through
foreign collaborations/ joint ventures and/or obtaining technical knowhow from R&D Centres
and Technical Institutes within the country or by their own developments. The TEI produces
virtually the entire range of textile machinery for cotton, blended and man-made fibre
textiles. And it exports over 30% of its annual production. (See Annexure – 1)

2.1 Technology Gap Analysis:

The Textile Machinery Manufacturers’ Association (TMMA) under the aegis of Ministry of
Heavy Industry conducted a thorough technological gap analysis, and identified key growth
sectors of the industry, through an international textile research consulting firm ‘Gherzi’ in
2011-12. The purpose of this study was to recommend and to enable the Government in
creating a suitable policy/ scheme document in achieving its objectives i.e. to make the Indian
TEI not only self-sufficient domestically but also become globally competitive by the year
2020. Following are its sectoral recommendations.

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2.2 TEI – Sectoral View as per Gherzi Report in 2011:

Table 2.1: TEI – Sectoral View- Gherzi Report

* The segments highlighted in pink are those where imports are the highest.

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2.3 Mapping of Indian Technology Level:

The technology gaps in terms of global competitiveness have remained a major cause of
concern as the imports have been on the steady rise as compared to the exports. The
technological capabilities of the industry can be gauged properly from the below grid that
classify the Indian TEI in 3 categories.

Table 2.2: Mapping of Indian TEI Level

Group I – The technological level of Ginning, Spinning, Weaving Preparatory, Synthetic

Machinery, Testing Equipment and Jute Machinery segments are considered in this category
as it is at par with International Standards. A substantial number of machines is produced and
supplied to the domestic as well as export markets. This industry segment needs to keep pace
with the latest advancements in the product development. Therefore, advance level of R&D
is being recommended. Some leading Indian companies in this group are mentioned below.
Example- LMW, Aalidhra Group, Weavetech Group, Palod Himson, Meera Industries &
Premier Evolvics.

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Group II – This group contains Weaving, Processing, Embroidery, and Knitting Machines, and
Parts, Components and Accessories. The level of technological gap (10-15 years behind) is
considered to be marginal.

Some of the Indian manufacturers have on their own or through a consortium, have done
R&D for a number of technologies, such as rapier weaving loom, processing machines,
Vertical Embroidery Machine, and Hi-Speed Circular & Warp Knitting Machines etc.
Therefore, in-house or institutional R&D and commercialization support is being
recommended for this type of technological level.

Example- Lifebond, Arun Industries, Yamuna Machines, Inspiron Engineering, Nantex

Machineries, Hi-tech International and Perfect Engineering

Group III – The technology is obsolete i.e. far behind (20-30 years behind) the global standard.
Since it would take huge investment of time and money for the R&D, duty free import, FDI or
Joint Ventures are being recommended to fill the technological gap in this segment.
Some global companies may consider bringing their technologies to India for supplying into
domestic & overseas markets.

Example- G A Morgan Dynamics, Nuva Machines, and Savio India etc.

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3.0 HUGE IMPORTS WHICH SHOULD BE SUBSTITUTED UNDER ‘MAKE IN INDIA’

As per the 2017-18 data, the domestic production-export-import figures stood at Rs. 6900
crores, Rs. 3000 crore and Rs. 11,000 crores respectively. Below are the 5 Textile Machinery
Technologies which were under top import items worth Rs. 6500/- crores by Indian buyers.

Table 3.1: Top 5 Imports of Textile Machine Technologies that Can be Substituted

All these technologies of Spinning, Weaving, Knitting, Processing, and Embroidery segments
are the core machinery items that cater to the ever-increasing demand of the Indian Textile
industry for globally competitive technology solutions. The textile items are not only supplied
in the domestic markets, but also supplied in premium export markets generating huge forex
for the country.

Therefore, the focus of the Indian Government should be on these technologies under ‘Make
in India’ campaign to substitute imports through indigenous technology development, joint
ventures, and foreign direct investments.

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4.0 TEI – POLICY SUGGESTIONS IN 12th FIVE YEAR PLAN

Based on the above challenges & recommendations in development of Indian Textile

Machines sector as a vendor to Indian Textile industry, the following TEI’s suggestions were
reflected in the 12th FYP Working Group Report on Capital Goods: chapter Textiles Machines.

• Policy related like allowing second hand textiles machines to be imported thus turning
India into a junkyard of discarded machines of China & EU in Textile Sector,
• Taxation matters: Inverted Duty, lower duties on critical hi-tech components imports,
• Industrial Infrastructural issues - absence of Common Engineering Facilities Centres
(CEFCs), Centre of Excellences (CoEs) for technology development & Industrial Parks,
• Technology Development Challenges in Machines and components thereof: Most
machines are of older technologies, some technologies / machine ranges like
garmenting/ knitting / tech textiles are missing. No
• Skill development of workers and managers: no institutional capacities,
• Exports and domestics marketing: require Govt support.

4.1 TEI Projects Under CG Scheme of DHI:

After the 12th FYP Plan, DHI brought out a scheme for the CG sector including Textiles
machines sector namely “Enhancement of Global Competitiveness of Indian Capital Goods
Sector” in November 2014. In this scheme two proposals submitted by TMMA for TEI under
‘Public Private Partnership (PPP)’, are now at advance stages of completion.

a) CoE at CMTI-Bangalore for development of two versions of 450 RPM and 600 RPM, ‘Hi-
speed Shuttle-less Rapier Loom’, by a consortium of 5 textile machinery manufacturers.

b) CEFC at Bardoli-Surat for ‘Technology, Skills and Capability Development’, by Science

Engineering & Technological Upliftment (SETU) Foundation a section-8 company.

However, more steps are needed; therefore, the present note covers further suggestion to
enhance the competitiveness of the Textile Engineering Industry under the aegis of Ministry
of Textiles in the coming decade.

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5.0 NEED FOR COMMERCIALIZATION & PROMOTIONAL SUPPORT

The Textile Machinery Industry needs large scale investments to upgrade itself with state-of-
the-art machines tools & equipment to innovate latest technologies, acquire adequate know-
how, and become capable to manufacture the modern textile machines for the textile
industry. It is also essential to become Globally competitive in the long run to sustain the
domestic and international market requirements. In the absence of adequate capital base, it
is necessary that textile machinery manufacturing units are provided with substantial funds
for investment in know-how and machine tools.

At the same time, promotion of these technologies in the domestic, & overseas markets
through participation in national & international events/ exhibitions is also crucial. Thorough
market research & support mechanism by the industry bodies/ associations shall be needed.

Table 5.1: Proposed Budget Outlay for ‘Make in India’ & ‘Globalizing’ these Technologies

Description Amount in (INR) Crore

1. Commercialization Support

a) Commercialization Grant (CG) 57.0

b) Technology Adoption Incentive (TAI) 678.0

2. Promotional Support

c) Export promotion, recognition, market research, & 15.0

support to industry associations

Total 750.0

5.1 Commercialization Support

Though in terms of Global average the Indian industry’s total expenditure on technology R&D
is minuscule, there are however a number of Indian entrepreneurs and institutions who had
been doing innovation in their own capacities. Most of the times it has been observed that a
product was conceptualized and prototyped, however due to want to funds and proper

Page 14 of 87
marketing strategy it couldn’t be introduced to the market, despite having huge potential to
succeed. Hence there is an urgent need to scout for those people, industry, organizations,
and institutions who have been involved with such kind of technology development and
promote these products and technologies under ‘Make in India’ momentum.

It is also suggested that the outright purchase/adoption of technologies in the sectors of

Garmenting, Knitting, Weaving, and Technical Textiles should be actively sought. The industry
scouting groups should be formed under aegis of OTXC, DHI, and TMMA to find out Indian &
Overseas companies (via VDMA, ACIMIT, Japan Plus channels etc.) to have possible
acquisitions. The technology readily available at domestic institutes/ universities, and
industry can also be acquired for commercialization.

Therefore, it is recommended to introduce a one-time ‘Commercialization Grant (CG)’ and

‘Technology Adoption Incentive (TAI)’ dedicated for the Technology Owners with a fund
outlay of Rs 735.0 crores.

5.2 Promotional Support

The focus should be towards ‘Export Promotion, Market Research & Support to Industry
Associations’ to globalize these technologies to earn valuable ‘Forex’ from the potential
overseas markets. A budget outlay of Rs. 15.0 crore is being proposed for this purpose.

The industry should encourage project exports through EXIM bank facilities particularly to
African, other South East Asian and Latin American Countries.

There are 3 types of goals envisaged in this report.

a) Short Term- 3 Indigenous Technologies for Immediate Commercialization

b) Medium Term- 2 Global Technologies for Commercialization
c) Long Term- 5 CEFCs & 2 CoEs for R&D, skill development & capacity building

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6.0 SHORT TERM: 3 INDIGENOUS TECHNOLOGIES FOR IMMEDIATE COMMERCIALIZATION

[Duration: 6-12 months]

TMMA(I) had been diligently scouting for the technologies as per the tech gaps indicated in
the Gherzi report from overseas and the domestic market for last 6-8 years. Two technology
scouting missions were taken to Italy (during ITMA Milan 2015 & India Business Meet 2016
Bergamo). Besides various industry visits had been organized to find out indigenous R&D.

Table 6.1: Indian Vs Foreign Technology – Cost Comparison & Import Value

Low Hanging Fruits- TMMA suggests 3 key technologies mentioned below for immediate
commercialization under the proposed commercialization scheme above.

a) Vertical Embroidery Machine (VEM) – By Nantex Machineries Pvt. Ltd. from Gurgaon
b) Hi-speed Circular Knitting Machine (HSCK) – By Hi-tech International from Ludhiana
c) Hi-speed Shuttle-less Rapier Loom (HSLR) – By TMMC from Surat

The Fiscal Solutions sought to commercialize these technologies vary but the Policy Solutions
are more or less common.

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7.0 VERTICAL EMBROIDERY MACHINE (VEM)

7.1 The Embroidery Machinery Market

The import of embroidery machines (HS Code 8447 - Horizontal & Multi-head both) was Rs.
1100 crore/year in the last 4 fiscal years. If a competent technology is available indigenously
via R&D/ Acquisition, even at 5% market evaluation that technology should be worth at least
Rs. 55.0 crore. The imported machine-cost ranges from Rs. 10.0 lakh (Chinese-Multi-head
Embroidery Machine) to Rs. 2.5 crore (German-Horizontal Embroidery Machine). Delhi, Delhi
NCR, Kundli, Panipat, Ludhiana, Amritsar, Surat, Mumbai, Bangalore, Chennai & Tirupur are
major embroidery markets in the country.

7.2 Nantex’s VEM: Potential & Challenges

Nantex Machineries Pvt. Ltd. is the only Indian textile machinery manufacturer who has
developed an indigenous Vertical Embroidery Machine (VEM). At approximately Rs. 40.0 lakh
per machine, it’s quite competitive in terms of fabric quality, & production cycles. Nantex’s
patent application (filed in 2009) was examined recently, & is expected to be awarded soon.
The company is getting satisfactory response from the domestic market and has also exported
one machine to Columbia last year. However, while doing R&D, the company incurred an NPA
(approx. Rs. 2.40 crore), & doesn’t have sufficient working capital to meet the demand. Its
prospective clients such as Richa Global, Orient Craft, DC Tex and GHCL, want to purchase at
least 20-30 machines at one shot for just sampling of their garments for the overseas market.

The current capacity of the company is to produce about 3 machines a month because of its
constrained financial means. The bank loan it took become NPA as the funds were utilized in
giving final shape to the machine during R&D. It has also borrowed from own sources and
infused over all Rs 12 crore to make this R&D successful. This financial crunch further
strangulated their efforts in generating liquidity, attracting investors, and bringing advance
payments from prospective buyers as well. That’s why it needs immediate capital infusion by
restructuring of its loan (NPA) to enhance its production capacity to meet the market demand.

Page 17 of 87
Image 7.1: VEM-Machine’s Images & Schematics

Even a 10% market share for VEM in next 3 years period should substitute imports worth Rs.
100 crores. A 50% import substitution shall raise that figure to Rs. 500 crores in 5 years’ time.
Being new, VEM technology could be worth Rs. 30 crores at a reasonable 12% market
evaluation. The patent is going to be an asset of Nantex which can attract joint ventures from
other Indian machine makers & venture capitalists, provided its NPA tag is lifted.

Image 7.2: Garments & Home Furnishing Products Made on VEM

Page 18 of 87
7.3 VEM Vs. Existing Technologies

Table 7.1: Technology Comparison- VEM Vs. Existing

Characteristics VEM 1- 4072 VEM120-150-192 Existing machine (Schiffli)

Machine Utilization % 97% 83%

Space Require to Install 26.5 Sq. Yard 500 Sq. Yard

Machine Cost / machine 26 to 38 Lacs 1.5 to 3.5 Cr

Emb. Order Quantity to process No limitations 1000 Mtrs minimum/ batch

Manpower Required 2 person /4 m/c /shift 6 person /1 machine /shift

Routing & speed balancing easy roquting & speed Tough to balance m/c speed

Material Handling Less handle More & Complicated handle

Material Feeding Same direction Roll form Batch preparation required

Process Wastage % 60 times reduction in % More wastage

-----as a Fabric % 1% 12%

-----as a Yarn % 1% 8%

Clarity of Design More realistic

Software Support Advanced file support Advanced file support

Operation Easy working Easy working

Process life cycle cost Lowest possible in market Comparatively high

Machine Maintenance cost Economical / cost effective Expensive / Costly

Specialty All over Embroidery Lace Embroidery

7.4 Product Videos

https://www.youtube.com/watch?v=eMcXTar9RgM
https://www.youtube.com/watch?v=9-Ouv6lmreU&t=187s
https://www.youtube.com/watch?v=9-Ouv6lmreU
https://www.youtube.com/watch?v=q9cl0wXirgc

Page 19 of 87
7.5 Other Concerns: Brand, Unit Cost & Patent

▪ Market Penetration - The technology needs initial nurturing, and financial support in
terms of getting commercialized successfully.

▪ Brand Perception – Being a new technology, brand building is one of the major concerns.
Its machines lie between European & Chinese machines in terms of Quality & Price.

▪ Cost Competitiveness - User industry wishes to have the Quality of European Standard
at the Lowest Prices of the Chinese Technology. Our machine’s current sales price is Rs.
40.0 lakh as compared to Rs. 250.0 lakh of a European’s or to Rs. 10.0 lakh of a Chinese’s.
So, we need to Reduce our Cost maintaining Quality.

▪ Patent Issues – Nantex’s patent application (2384/Del/2009) filed in 2009 was examined
after a prolonged gap of 9 years. And it’s yet to hear from the patent office on the final
award of the patent. Whereas the International patent is extremely expensive however
got a good search report (compared with existing 20 innovations) as novelty item.

▪ Import of Used/ Refurbished Machines - At present, used/ refurbished machines are

imported at even less than half the cost of Indian machines. To restrict import of such
machines the words such as "refurbished/ reconditioned/ retrofitted" must be added in
the definition of 'Second-hand/ Used Machine' imports under the ATUF Scheme.

▪ ATUF Subsidy on Import of Machines already manufactured in India - Since the latest
embroidery technology is available in India, subsidy on import of such machines should
be done away with. At present the ATUF Subsidy is 15% on import of embroidery
machines.

Page 20 of 87
7.6 Solution: Financial

Commercialization Grant - VEM is pegged at Rs. 30 crore technology. Nantex requires about
Rs. 10.0 crore of ‘Working Capital’ to develop its manufacturing capabilities, enhance its
marketing, and branding efforts.

Hence, a 30% of the technology cost is sought as the “Commercialization Grant”.

Commercialization Grant = 30% x Rs. 30.0 crore = Rs. 9.0 crore
(Remaining balance to be raised by the company)

Technology Adoption Incentive – Nantex also needs to reduce the cost of its machines so that
it can bear the commercialization challenges.

Therefore, it proposes a 30% ‘Technology Adoption Incentive’ on each machine for the first
1000 machines to become cost competitive in the market.
Technology Adoption Incentive = 30% x Rs. 40.0 lakh x 1000 machines = Rs120.0 crore

Total Financial Support Required = Rs. 129.0 crore

It is thus proposed a total financial support of Rs. 129.00 crore (Rs. 9.0 crore immediate) in
5 years’ time period.

Page 21 of 87
7.7 Commercialization of VEM: Plan of Action

If the Government of India can provide the proposed ‘Commercialization Grant’ and
‘Technology Adoption Incentive’, it can help scale up the production by many folds.

Table 7.2: Commercialization of VEM: Plan of Action

Page 22 of 87
7.8 Positive Outcomes of Nantex’s Efforts So Far

▪ Two of its machines are running at a client site producing desired fabric at profitable rates
for the domestic embroidery market

▪ One of its machines sold to a Columbian customer is creating positive traction among the
Latin American countries

▪ The positive results of the domestic & overseas markets are promoted to important
embroidery markets such as Ludhiana, Amritsar, Delhi NCR, Panipat, Surat, Mumbai,
Bangalore, Chennai, & Tirupur in India, and Argentina, Brazil, Turkey, Saudi Arabia, Africa,
Italy, Pakistan, Bangladesh, Indonesia etc. in the overseas

▪ During ITM Istanbul 2018, the TMMA promoted and visited a number of Nantex clients
to examine if they really would be interested in buying its machines. The feedback was
positive

▪ Nantex’s VEM was adjudged the 2nd runner up out of 75 applications from all over India,
during the final round of ‘Innotex 2018’, organized by ‘Confederation of Indian Textile
Industry (CITI), to recognize indigenous innovation and R&D in Textile Industry.

Image 7.3: VEM-Testimonials

Page 23 of 87
7.9 R&D Recognition for VEM:

▪ The Vertical Embroidery Machine (VEM) developed by Nantex Machineries was

recognized among top 10 innovations from 75 applications received for Innotex 2018
organized by “Confederation of Indian Textile Industry” on 27th-28th November 2018 in
New Delhi.
▪ The VEM technology was given the 2nd Runner Up Award.

Image 7.4: VEM-Innotex 2018- Presentation & Awards

Page 24 of 87
8.0 HI-SPEED CIRCULAR-WEFT KNITTING MACHINE (HSCK)

8.1 The Knitting Machinery Market

The import of knitting & embroidery machines (HS Code 8447) for last 4 fiscal years was
approximately Rs. 2600 crore/ year. The import of Knitting machines was Rs. 1500 crore in
these fiscal years. Out of these the Circular Knitting Machines constituted Rs. 1000 crore.

If a competent technology is available indigenously via R&D/ Acquisition, even at 3% market

evaluation that technology should be worth at least Rs. 30.0 crore. The imported machine-
cost ranges from Rs.18 lakh Taiwan, 12 to15 lakh China (German & Japanese Machines cost
22 to 35 lakh in Ludhiana, Punjab). Mumbai in Maharashtra, Kolkata in W. Bengal, Surat in
Gujarat, and Tirupur in Tamil Nadu are major knitting markets in the country

8.2 Hi-Tech’s HSCK: Potential & Challenges

‘Hi-tech International’ is the only Indian textile machinery manufacturer who has developed
an indigenous High-speed Circular-WEFT Knitting machine. At approximately Rs. 10.0 lakh per
machine, it’s quite competitive in terms of fabric quality, and production cycles.

The company is getting satisfactory response from the domestic market. The company has
competent R&D set up with qualified engineers from Sri Lanka & Bangladesh. The company
has infused a working capital of approx. Rs. 2.0 crore in the business and it requires more
capital to cater to the demand. Its prospective clients such as A.D Fabrics, S.N Traders & Biba,
want to purchase at least 10-15 machines at one shot for just sampling of their Fabrics for the
domestic and overseas markets.

The current capacity of the company is to produce about 15 to 30 machines a month because
of its constrained working capital. It faces stiff competition from Chinese companies in terms
of huge subsidies & export benefits provided by their Government. That’s why Hi-tech needs
immediate capital infusion to enhance its production capacity to be able to meet the market
demand.
Page 25 of 87
Image 8.1: HSCK-Machine & Product

Even a 10% market share in next 3 years’ time period will be able to substitute imports worth
Rs. 100 crores. A 50% import substitution shall raise that figure to Rs. 500 crores in 5 years’
time frame. This technology is going to be an asset of Hi-tech which can attract joint ventures
from other Indian machine makers & possible to open Subsidiaries in Bangladesh & Sri Lanka.

Image 8.2: Different Types of Fabric Produced on HSCK Machine

Page 26 of 87
8.3 HSCK - Technical Specification

• The frame of machine combines the knitting principle with human engineering. The
outline is pretty and it’s firm and reliable. It adopts good cast iron, long natural timing
effect and artificial timing effect, which prevents the parts from deforming.
• Special driving system makes the machine run more stable. Main plate & its gear
adopts oil-soaking & high-quality lubricating oil, making running noise lesser & driving
gear durable.
• Strong interchangeability. Just by changing the parts in the heart, single knitting
machine could be changed into terry or thread fleece machine.
• All cams & cam boxes are made from imported alloy steel from Japan & Germany,
engraved & machined by CNC processing center from Germany & Japan, which makes
the needle track smooth & the needle would be fluent & durable when the machine
runs at high speed.
• New type designed center system has tight construction and stable going up and
down, which makes the fabric weight adjust precisely and simply.
• By changing cams with different functions, the machine can produce various fabrics
with different singly structure.

Table 8.1: HSCK-Machine Models

Model Diameter (inch) Gauge Feeder Applicable Yarn

HX3F 9-46 9G-42G 37F-138F Cotton, Synthetic

HX4F 9-46 18G-32G 36F-184F Fiber, Blending Silk

and Artificial Wool
HX6F 20-46 18G-32G 54F-276F

• In addition to single size series, we also produce twin-size series.

• One diameter machine can be changed into another diameter machine. For ex. 34”x28
GG can be interchanged with 30”x24GG. Function is available for single jersey or
double jersey machine

Page 27 of 87
8.4 HSCK: Technology Parameters Compared

Table 8.2: HSCK- Performance Comparison with Foreign Machines

SN Parameter German/ Taiwanese Chinese Indian (Hi-Tech

Japanese International

1. Unit Cost (INR in Lakhs) 35-40 15-18 12-15 10-12

2. Machine’ Top Consistent Speed 28-30 25-30 22-25 28-30
(RPM) 24x7
3. Machine’s Top Speed (RPM) 30-35 30-35 28-30 30-35 (R&D going on
Range to raise it to 45 RPM
4. Heat-up Quotient Run at Top 1-2 hrs 30-40 min 20 min 1-2 hrs
Speed
5. Replaceable parts - Sinker Cam 4000 3000 1500 1000
(INR)
6. Complete Cam Conversion Kit 4-5 3-4 2-3 1-2
(INR in Lakhs)

8.5 Product Videos:

Actual Mill Run -> https://youtu.be/rFZVGAxKuns

Close-up View -> https://youtu.be/QMcq78OadVY
Electronic Panel Display-> https://youtu.be/F6u2KQLAUmA

Page 28 of 87
8.6 Other Concerns: Brand, Unit Cost & Patent

▪ Market Penetration - The technology needs initial nurturing, and financial support in
terms of getting commercialized successfully.

▪ Brand Perception - Being a new technology, brand building is one of the major concerns,
as the Indian machines lie between European and Chinese machines in Quality & Price.

▪ Cost Competitiveness - User industry wishes to have the Quality of European Standard
at the Lowest Prices of the Chinese Technology. Our machine’s current sales price is Rs.
10.0 lakh as compared to Rs. 40.0 lakh of a European’s or to Rs. 8 to 10 lakhs of a
Chinese’s. The second-hand machines sell at Rs. 4-5 lakh, which is another major source
of competition for our product.

▪ Import Duty on Complete Machine – At present its 7.5%, but the importers are getting
their machines under invoiced, to avoid paying duties.

▪ Import of Used/ Refurbished Machines - At present, used/ refurbished machines are

imported at even less than half the cost of Indian machines. To restrict import of such
machines the words such as "refurbished/ reconditioned/ retrofitted" must be added in
the definition of 'Second-hand/ Used Machine' imports under the ATUF Scheme.

▪ ATUF Subsidy on Import of Machines already manufactured in India - Since the latest
Circular & Flat Knitting technology is available in India, subsidy on import of such
machines should be done away with. At present the ATUF Subsidy is 15% on import of
Knitting machines.

Page 29 of 87
8.7 Solution: Financial

▪ Commercialization Grant – Hi Speed Knitting machine is pegged at Rs. 30 crore

technology. Hi-tech requires about Rs. 10.0 crore of ‘Working Capital’ to develop its
manufacturing capabilities, enhance its marketing, and branding efforts.

Hence, a 30% of the technology cost is sought as the “Commercialization Grant”.

Commercialization Grant = 30% x Rs. 30.0 crore = Rs. 9.0 crore
(Remaining balance to be raised by the company)

▪ Technology Adoption Incentive – Hi-tech also need to reduce the cost of its machines so
that it can bear the commercialization challenges.

Therefore, it proposes a 30% ‘Technology Adoption Incentive’ on each machine for the first
1000 machines to become cost competitive in the market.
Technology Adoption Incentive = 30% x Rs. 10.0 lakh x 1000 machines = Rs30.0 crore
Total Financial Support Required = Rs. 39.0 crore

Page 30 of 87
8.8 Commercialization of HSCK: Plan of Action

Currently ‘Hi-Tech International’ has limited financial means to commercialize the product. Hence, it
seeks Commercialization support from the Government to move on.

Table 8.3: Commercialization of HSCK: Plan of Action

8.9 Positive Outcomes of Hi-Tech’s Efforts so Far:

▪ Four of its machines are running at a client site producing desired fabric at profitable
rates for the domestic knitted cloth market
▪ The positive results of the domestic markets are promoted to important Circular knitting
such as markets such as Ludhiana, Surat, Kolkata, Mumbai & Tirupur in India etc.
▪ It has set up world’s best CNC Machines from Switzerland, Germany, Japan, & England in
its Ludhiana plant to produce components of global standards for precision components.
▪ Its machines quality is much better than China.
▪ If this technology is commercialized by government support in next 4 years, nobody shall
buy Chinese machines in India.

Page 31 of 87
9.0 HI-SPEED SHUTTLE-LESS RAPIER LOOM (HSRL)

9.1 The Rapier Loom Market

The import of new shuttle-less weaving machines (rapier, airjet, waterjet-HS Code 8446) for
last 4 fiscal years was approximately Rs. 2000 crore/ year (no accessories). The import of
rapier weaving looms alone constituted Rs. 600 crore each in these fiscal years. If a competent
technology is available indigenously via R&D/ Acquisition, even at 5% market evaluation that
technology should be worth at least Rs. 30.0 crore. The new imported machine-cost ranges
from Rs. 20.0 lakh (Chinese) to Rs. 50 lakhs (European/ Japanese), whereas a
used/refurbished machine costs Rs. 10-20 lakh. Surat, Ahmedabad, Mumbai, Ichhalkaranji,
Bhiwandi, Panipat, Hyderabad, & Coimbatore are major rapier loom markets in the country.

9.2 TMMC’s Rapier Weaving Loom: Potential & Challenges

A Consortium of 5 Indian loom manufacturers known as ‘Textile Machinery Manufacturers’

Hi-tech Research & Development Foundation (TMMHRDF or in short TMMC)’ registered as a
SPV company under section 8 of Company’s Act, has developed a prototype Hi-speed Shuttle-
less Rapier Loom (450rpm) at CMTI Bangalore, under DHI’s CG Scheme, in phase -I. Currently
the loom is getting tested under actual mill conditions for 3 months in Surat. Its success in the
market shall decide the future R&D of a 600rpm version of the loom in the 2nd phase of the
project. At the moment this rapier loom cost is estimated to cost Rs. 35.0 lakh which is almost
equal to any European loom’s cost. A similar Chinese loom is available at Rs. 20-22 lakh.

Though the consortium is confident of matching the quality of production from this loom, but
it needs to match the price offered by the Chinese loom makers. The company is getting
satisfactory attention from the domestic market players. To bring down the cost of each loom
the consortium needs to enhance its current production capacity and marketing efforts.
Though it has contributed its share of 20% for R&D of this technology in addition to time and
other resources spent. However, many fiscal issues in last two years such as demonetization,
GST roll out, liquidity crunch in the banking sector, and fluctuating oil vs dollar rates, have
constrained its financial means to commercialize this technology on its own.
Page 32 of 87
That’s why TMMC needs sufficient working capital to enhance its production capacity to be
able to meet the market demand. Even a 10% market share in next 3 years’ time period will
be able to substitute imports worth Rs. 60 crores. And a 50% market share shall amount to
Rs. 300 crores in next 5 years.

Image 9.1: HSRL-Machine Images & Schematics

Image 9.2: Different Types of Fabric Produced on HSRL

Page 33 of 87
9.3 HSRL’s Technical Specification

Table 9.1: HSRL-Technical Specifications

Item Description

Weaving speed 100 to 450 picks per minute

Aramid, Acetate, Lyocell, Cotton, Viscose, Elastane, Glass fibre, Flax,

Yarn type Polyamid, Polyacrylic, Polyester, Polyprop, Silk, Wool, Jute, Filament, Spun,
Mono, Jari, Bemberg, Slub, Catatonic, Roto, Nylon, Acrylic, Industrial Yarns

Spun Yarns: ~ Ne 120 to Ne 1.8

Yarn count
Filament Yarns: ~ 22 Den to 4000 Den

Types of weaves Plain, Twill, Satin, etc.

Pick density ~ 6 to 300 picks per inch

Weft selection Up to 8 colors

Reed width Up to 220 cm

Shedding frames 20 nos

Warp beam dia Up to 1000 mm

Page 34 of 87
9.4 Other Concerns: Brand, Unit Cost & Patent

▪ Market Penetration - The technology needs initial nurturing, and financial support in
terms of getting commercialized successfully.
▪ Brand Perception – Being a new technology, brand building is one of the major concerns.
At large, Indian machines lie between European and Chinese machines in terms of Quality
& Price.
▪ Cost Competitiveness - User industry wishes to have the Quality of European Standard
at the Lowest Prices of the Chinese Technology. Our machine’s estimated sales price is
Rs. 35.0 lakh as compared to Rs. 40.0 lakh of a European’s or to Rs. 20.0 lakh of a
Chinese’s. So, we need to Reduce our Cost maintaining Quality.
▪ Patent Issues – The Indian Patent Office normally takes about 2-4 years in examining and
granting the patent. CMTI has filed for patents on certain new technologies developed
for this rapier loom. The consortium is concerned about the time the patent office is going
to grant the patent.
▪ Nil Import Duty on Complete Machine – Import duty on technology already developed
and manufactured in India, should be 7.5%. Currently it is 0%.
▪ Import of Used/ Refurbished Machines – To restrict import of used/ refurbished
machines the words such as "refurbished/ reconditioned/ retrofitted" must be added in
the definition of 'Second-hand/ Used Machine' imports under the ATUF Scheme.

Image 9.3: Used Machines’ e-Sales Portals-https://dir.indiamart.com/search.mp?ss=used+rapier+loom+sigma

▪ ATUF Subsidy on Import of Machines already manufactured in India - Since the latest
rapier loom technology is available in India, the 10% ATUF subsidy on import of such
machines should be stopped.

Page 35 of 87
9.5 Solution: Financial

Commercialization Grant – The Rapier Loom Technology is pegged at Rs. 30 crore technology.
TMMC requires about Rs. 10.0 crore of ‘Working Capital’ to develop its manufacturing
capabilities, enhance its marketing, and branding efforts.

Hence, a 30% of the technology cost is sought as the “Commercialization Grant”.

Commercialization Grant = 30% x Rs. 30.0 crore = Rs. 9.0 crore
(Remaining balance to be raised by the company)

Technology Adoption Incentive – TMMC also needs to reduce the cost of its machines so that
it can bear the commercialization challenges.

Therefore, it proposes a 30% ‘Technology Adoption Incentive’ on each machine for the first
1000 machines to become cost competitive in the market.
Technology Adoption Incentive = 30% x Rs. 35.0 lakh x 1000 machines = Rs105.0 crore
Total Financial Support Required = Rs. 114.0 crore

It is thus proposed a total financial support of Rs. 114.00 crore (Rs. 9.0 crore immediate) in
5 years’ time period.

Page 36 of 87
9.6 Commercialization of HSRL: Plan of Action

Currently TMMC has limited financial means to commercialize the product. Therefore, it
seeks Commercialization support from the Government to move on.

Table 9.2: Commercialization of HSRL: Plan of Action

Page 37 of 87
9.7 Positive Outcomes of TMMC’s Efforts So Far

▪ CMTI has developed weft insertion mechanisms for weaving at 450 rpm & filed a patent
(application no.-201841043790) under title- “An apparatus for high speed weft insertion
in shuttle-less rapier looms”.
▪ The HSRL developed by TMMC was recognized among top 10 innovations from 75
applications received for Innotex 2018 organized by “Confederation of Indian Textile
Industry” on 27th-28th November 2018 in New Delhi.

Image 9.4: HSRL-Recognition Among Top 10 Innovations at Innotex 2018

Page 38 of 87
9.8 Consolidated Fiscal Incentives Sought to Commercialize 3 Indigenous Technologies

TMMA on behalf of the industry seeks from the Ministry of Textile a consolidated
commercialization grant and technology adoption incentive of Rs. 282 crores for these three
indigenous technologies which can be commercialized immediately.

Table 9.3: Consolidated Fiscal Incentives to Commercialize 3 Indigenous Technologies

The industry envisages of achieving a target of 9.64 as the net ‘Return on Investment (ROI)’
for the Government of India.

9.9 Suggested Threshold & Mechanism

• Only those Indian manufacturers shall be considered for CG & TAI who have been
scouted/ recognized by a group of experts chosen by TMMA, MoT & MHI for ‘Technology
Adoption’ to commercialize their products for domestic & overseas markets.

• The CG is credit delinked one-time grant to the technology innovators.

• The CG & TAI availing TEI should be able to produce and sell the textile machines of worth
equivalent to four times the value of TAI availed in a particular fiscal year, to the domestic
& overseas markets (Export) in the next 5 years period.

• An undertaking should be given by the beneficiary unit for availing CG & TAI.

Page 39 of 87
10.0 MEDIUM TERM: 2 GLOBAL TECHNOLOGIES FOR COMMERCIALIZATION

[Duration: 12-24 Months]

There are other promising textile machinery technologies in Spinning, Processing, Garmenting
and Testing Equipment which are futuristic technologies and can be ‘Make in India (MII)’.
Some Indian companies have either developed or are in the process of developing a number
of such technologies through global partnerships and in-house R&D. Besides there are some
interested global companies who wish to bring their technologies & invest in India.

Below we propose two of such technologies, wherein a foreign company as well as an Indian
company has shown interest for MII Campaign.

a) Spinning-Automatic Winding Machine- By Savio Italy at Savio India in Coimbatore

Savio Italy: https://www.saviotechnologies.com/savio/en/Pages/default.aspx

Savio India: https://www.savioindia.com/

b) Processing-Sustainable & Smart Machine- By Dhall Group, Ahmedabad

Dhall Group: https://www.chopra-dhall.com/Home/automation

Both of these technologies are high tech in nature and have huge demand locally and globally.
In one case where the foreign technology owner will have to shift its entire manufacturing
base from Italy to India for manufacturing Auto-winders; in another case the domestic
technology owner will have to establish its state-of-the-art manufacturing plant in India to
produce its SMART Processing machines.

Therefore, the initial financial & policy boost from the Government will be essential.
Page 40 of 87
11.0 SPINNING-AUTOMATIC CONE WINDING MACHINE/AUTO-CONOERS/ LINK-CONERS

As per the FY 2014-15 to FY 2017-2018 data, import of Automatic Cone Winding machines
(HS Code 84454010) stood at average Rs.930.49 Cr per annum. There are three renowned
machinery manufactures in the world, who have capability to produce this high technology
Automatic Winding Machines. These are Savio Group, Schlafhorst Group, and Murata Group
based respectively in Italy, Germany and Japan. These manufacturers have developed these
machines over many decades and the technology is closely guarded. There have been no
cases where these manufactures have established joint ventures and technology transfers in
recent past.

There is no credible Automatic Cone Winding Machinery manufacturer in India with

contemporary technology. If a competent technology is available indigenously, even at 5%
market evaluation that technology should be worth at least Rs.46.5 Cr.

Among the three, only the Savio Group, an Italy based multinational has developed the
Automatic winding technology and is present in India through FDI, with manufacturing facility
at Coimbatore (TN) presently manufacturing only twisting machines (TFO machines - Two for
One Twisters) – who have shown interest in a such initiative of Govt of India under ‘Make in
India’ Campaign. Automatic Winding Machines are produced in Italy by Savio and are being
supplied all over the world.

11.1 Indigenous manufacturing of Automatic Cone Winders would give following advantages

a) substitute foreign currency outflow to the tune of Rs.930 Cr per annum

b) Indigenously available technology would develop allied suppliers base in India and
benefit in developing engineering Industry
c) Direct and Indirect employment would be generated.
d) Export potential to neighbouring countries, generating inflow of foreign currency.
e) Self-reliance and reduction in dependency on Imports.

Page 41 of 87
Image 11.1: Autowinders at a Spinning Mill

Image 11.2: Autowinders- Product Images

Page 42 of 87
11.2 Other Concerns:

▪ Market Penetration - The technology needs initial nurturing, and financial support in
terms of getting commercialized successfully as being manufactured in India.

▪ Cost Competitiveness - User industry wishes to have the Quality of European Standard
at the Lowest Prices, thus import duties on critical components of the Automatic Winders
need to be made nil to make the technology available at competitive price.

Table 11.1: Import Duty Structure on Critical Components

Critical Items Tariff item Present Duty

Automatic Yarn Splicers for Automatic Cone Winders 8448 32 90 Nil *
Spindle Motor for Automatic Cone Winders 8448 32 90 Nil *
Grooved Winding Drums for Automatic Cone Winders 8448 32 90 Nil *
Electronic yarn clearer for Automatic Winding Machine 8448 20 00 7.5% #
9032 89 90 10% #
* Vide notification No: 72 /2018-Customs dated 28.09.18 (# To place in exemption list)

▪ Technology transfer and royalties – Since the technology is guarded closely by three
manufactures, Initial lump sum payment and royalties need to be supported to have the
successful commercialization of the machines.

▪ Import of Used/ Refurbished Machines - To restrict import of such machines the words
such as "refurbished/ reconditioned/ retrofitted" must be added in the definition of
'Second-hand/ Used Machine' imports under the ATUF Scheme.

▪ ATUF Subsidy on domestically manufactured Machines in India – At present ATFUS

there is no subsidy on Automatic Winding machines. Since the latest technology would
be available in India and to attract the investment of the user Industry to adopt
domestically manufactured machines – Propose to have interest subsidy on Indigenously
manufactured Automatic Winding Machines.

Page 43 of 87
11.3 Solution: Financial

▪ Commercialization Grant- Below is the break-up of work to be done to commercialize

the technology.

Table 11.2: CG Utilization Break-up

Investment Value in Rs. Cr.

Building and other utilities Rs. 8.00
Assembly line and accessories Rs. 4.80
Tools, Fixtures, gauges etc. Rs. 28.00
Technology – Lump-sum payment (Approximate) Rs. 8.00
TOTAL Rs. 48.80
COMMERCIALISATION SUPPORT SOUGHT – 30% Rs. 14.64 ~ Rs. 15.0*

*The total figure of commercialization grant above is rounded to Rs. 15.0 crore.

▪ Technology Adoption Incentive- It is proposed to have Technology Adoption Incentive’

on each machine for the first 1000 machines to become cost competitive.

Table 11.3: TAI Utilization Break-up

Technology Adoption Incentive (% of Sales value)

Sales and marketing expenses 3%
Service setup and expenses 5%
R&D setup and expenses 5%
Royalties 5%
TOTAL 18%
TAI for = 1000 Machines x Rs.1.20 Cr (CPM) x 18% Rs.216 Cr.

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12.0 PROCESSING-SUSTAINABLE & SMART MACHINES

12.1 Smart Textile Processing Market

As per the 2017-18 data, the domestic production-export-import figures stood at Rs. 6900
crores, Rs. 3000 crores and Rs. 11,000 crores respectively. Import of processing machines (HS
Code 8451) for last 4 fiscal years was approximately Rs. 1000 crore/ year. The investment in
Hi-tech Sustainable & Smart Processing Machines have remained minimal. Due to its
significantly reduced environmental footprints & huge scale of economy, these technologies
are in huge demand overseas. Ludhiana, Surat, Ahmedabad, Mumbai, Bangalore, & Tirupur
could be major markets in the country for Smart Processing Machines.

Founded in 1959, Dhall Enterprises (Ahmedabad) is forging ahead in some key research areas
to disrupt existing industry trends and establish global leadership through global JVs with
industry-best teams and indigenous application-based research:

a) Online Resource Recovery - Using a breakthrough approach, Dhall is on the cusp of

disrupting existing unit economics by ensuring 90% recovery of the most valuable
resources in wet finishing and processing (from Caustic, to Indigo and Water) with 6-18
months payback periods guaranteeing record low consumption profiles while reducing ETP
load & ensuring a sustainable future.

Financial Impact: Numbers: 100 units/ year, Value ~ USD 25 mil / year, Market: Global. In
India, Indigo and Water Recovery loss accounts for USD 1 billion / year, including higher
treatment costs and potential environmental degradation

b) Ultra-sonics - Immersing the concept of new-age ultra-sonics on retrofit opportunities

(with existing machines) to cut-back water consumption by 25-50% in most wet
applications while ensuring better impregnation of chemicals & deeper shades for dyeing.

Financial Impact: Numbers: 500 units/ year, Value ~ USD 25 mil/ year, Market: Global

c) Smart Platforms - In the age of fast-fashion and short turnaround times, we are building
an agile, next-gen platform that monitors and benchmarks your asset parameters in real-
time to deliver meaningful insights and guaranteed savings of 5% on clients’ bottom-line,
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 else the solution is free. Uses Artificial Intelligence, Deep Learning Algorithms on a cloud-
based, asset-light, mobile-only platform.

Financial Impact: Numbers: 200 units/ year, Value ~ USD 100 mil/ year, Market: Global

Image 12.1: Smart Processing Machines-Concept of the Product

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12.2 Other Concerns: Brand, Unit Cost & Patent

▪ Market Penetration – The technology needs initial nurturing, and financial support in
terms of getting commercialized successfully.

▪ Brand Perception – Being a new technology, brand building is one of the major concerns,
as large Indian machines lie between European and Chinese machines in terms of Quality
& Price. To circumvent these challenges, Dhall Enterprises is working closely with
European partners having proven experience and expertise in recovery technologies.

▪ Cost Competitiveness – Breakthrough approach with 6-18 months payback on initial

investment while helping clients build differentiated brand positions and leaner, more
profitable growth models

▪ Patent Protection – Based on initial legal review, underlying process and technology is
patentable and we are in the process of filing necessary paperwork

12.3 Solution: Financial

▪ Commercialization Grant – The technologies are pegged at Rs. 50 crore technology. Dhall
requires about Rs. 15.0 crore of ‘Working Capital’ to develop its manufacturing
capabilities, enhance its marketing, and branding efforts.

Hence, a 30% of the technology cost is sought as the “Commercialization Grant”.

Commercialization Grant = 30% x Rs. 50.0 crore = Rs. 15.0 crore
(Remaining balance to be raised by the company)

▪ Technology Adoption Incentive – Dhall also needs to reduce the cost of its machines so
that it can bear the commercialization challenges.

Therefore, it proposes a 18% ‘Technology Adoption Incentive’ on each machine for the first
1000 machines to become cost competitive in the market.
Technology Adoption Incentive = 18% x Rs. 105 lakh x 1000 machines = Rs189.0 crore

Total Financial Support Required = Rs. 204.0 crore

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12.4 Consolidated Fiscal Incentives Sought to Commercialize 2 Global Technologies

TMMA on behalf of the industry seeks from the Ministry of Textile a consolidated
commercialization grant and technology adoption incentive of Rs. 453 crores for these two
global technologies which can be commercialized in the medium term i.e. 12-24 months.

Table 12.1: Consolidated Fiscal Incentives Sought to Commercialize 2 Global Technologies

The industry envisages of achieving a target of 4.57 as the net ‘Return on Investment (ROI)’
for the Government of India, provided above requested fiscal solution is offered by the
Government.

In addition to these technologies, the industry can also seek Joint Ventures on key textile
machinery technologies under the aegis of Ministry of Textiles & Ministry of Heavy Industry
from global players for ‘Make in India’ campaign.

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12.5 Government Initiatives: Joint Ventures & or Foreign Direct Investment in TEI for MII

The Ministry of Textiles along with Invest India had initiated a dialogue in May 2018 with their
Japanese counterparts regarding a possible tie up with the Indian companies to manufacture
textile machines in India. The representatives of MoT, through Japan Plus (DIPP) had indicated
the names of 9 Japanese companies with whom the Indian companies could do joint ventures.
TMMA (I) has submitted to them a list of 8 Indian companies (mentioned below) who have
shown interest in joining hands with these Japanese companies.

Table 12.2: List of Japanese & Indian Companies for Potential JVs under Make in India
Japanese Companies (Textile Related Machinery Field)

Company Name Sales (Japanese Yen) Date of Set up Website

Toyota Industries Corporation 2.2 trillion 1926 https://www.toyota-industries.com/
Murata Machinery, Ltd. 100 billion 1938 https://www.muratec.net/
Brother Industries, Ltd. 700 billion 1934 http://www.brother.com/index.htm
Okamoto Corporation 30～100 billion 1948 http://www.okamotogroup.com/en/
Kasen Nozzle Mfg. Co., Ltd. 5～30 billion 1948 http://www.kasen.co.jp/english/
Precision Fukuhara Works, Ltd. 5～30 billion 1956 http://www.pfw.co.jp./english/p-top/index.html
Barudan Co., Ltd. - 1969 http://www.barudan.co.jp/en/index.html
Murata Engineering, Ltd. 300 million～1 billion 1975 https://www.muratec.jp/mec/
TMT Kamitsu, Inc. 1～5 billion 1936 http://www.kamitsu.co.jp/english/

Indian Companies (Textile Related Machinery Field)

Date of Set
Company Name Sales (INR) up Website Interested in Technology
Air jet Loom,Type
Aalidhra Group of Industries 4.0 billion 1975 http://aalidhra.com/aalidhra_group.htm Muratec Water jet Loom
Air jet Loom,
Manugraph India Limited 3.0 billion 1972 http://www.manugraph.com/ Toyota Water jet Loom
Processing
Harish Enterprises 0.5 billion 1955 http://www.harishenterprise.com Barudan Machines
Toyota, Murata, Spinning,
Brother, Precision Weaving,
Peass 0.5 billion 1962 http://www.peass.com Fukuhara Garmenting
Spinning,
MSB Consulting 50 million 2010 http://www.msbconsulting.in/ Toyota Weaving,
Air jet Loom,
Premier Looms Mftrs. Pvt. Ltd. 150 million 1978 http://www.premierloom.com Toyota Water jet Loom
Yamuna Machine Works Pvt. Processing
Ltd. 1.25 billion 1990 www.yamunamachine.com Barudan & TMT Machines
Processing
Exolloys Engineering Pvt. Ltd. 100-150 million 2000 www.exolloys.com Barudan & TMT Machines

The above list reflects the range of different machinery types such as Spinning, Weaving,
Knitting, Processing, and Garmenting in which these Indian & Japanese companies can
collaborate. These are the very areas in which the technology gaps and machine imports are
substantial.

It is recommended that the MoT should extend this dialogue to next level with their Japanese
equivalents, and the industries on both sides to take these developments further.

Similar trade & government delegations can be planned in other European countries such as
Germany, & Italy, to seek opportunities for technology transfer, joint ventures, and FDIs.
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13.0 LONG TERM: 5 CEFCs & 2 COEs- R&D, SKILL DEVELOPMENT & CAPACITY BUILDING

[Duration: 12-48 Months]

The Group of Secretaries (F.No.23/01/2018 dated 31-07-2018) based on its meeting held on
21st June 2018 recommended an action plan that envisaged to establish 2 Center of
Excellences (CoE) & 5 Common Facility Centers (CFC) for Knitting (including embroidery),
weaving, garmenting and other identified gaps, with a total budget outlay of Rs. 400 crores.
These are long term projects (12-48 months) that shall focus on the future R&D requirement
and enhancing the global competitiveness of the Indian Textile Engineering industry.

13.1 Five Common Engineering Facility Centers (CEFCs):

DHI organized a meeting on 5th September 2018 with MoT & Industry officials to brainstorm
roadmap for setting up these CEFCs and CoEs. A budget of Rs. 100 crores, was recommended
for creating 5 CEFCs in the country. The proposed budget may vary depending on the DPR.The
participants pointed out that 80% of the textile machineries are produced in 3 main textile
clusters across the country viz. Surat, Ahmedabad and Coimbatore. Therefore, three CEFCs
can be located at these locations.

Table 13.1: Location of 3 CEFCs in Major Textile Clusters in India

S CEFC City Greenfield/ Focus Segment Proposed CEFC DPR Status Proposed
N Brownfield Partner Budget
1 Surat Existing Processing/ Surat Engineering To be INR 20
CEFC at Finishing etc. & Technology prepared crores
Bardoli Upgradation (SETU)
Foundation
2 Ahmedabad Greenfield Spinning/ IIT Gandhinagar To be INR 20
Weaving/ prepared crores
Accessories etc.
3 Coimbatore Greenfield Spinning/ Local Industry A DPR was INR 20
Processing/ Association submitted to crores
Accessories etc. DHI in 2014

The other smaller clusters are situated in Panipat, Ludhiana, Jalandhar, NCR, Kolkata, Kanpur
and Tirupur etc. So other two CEFCs can be established at any of these locations based on the
feasibility studies, and stakeholders’ interest in these clusters. At the moment, Panipat and
Kolkata can be considered for these CEFCs.
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Table 13.2: Locations of 2 other CEFCs in India

SN CEFC Greenfield/ Focus Segment Proposed CEFC DPR Status Proposed

City Brownfield Partner Budget
4 Panipat Proposed Processing/ Friends To be revised as INR 20
CEFC under Weaving/ Engineering and per DHI norms- crores
MSME, but Home Dashmesh Looms Land & building
not yet Furnishing etc. & Jacquard - exist – Need
approved Panipat Technology
5 Kolkata Greenfield Jute Spinning/ Lagan Submitted to INR 20
Accessories Engineering and DHI- Land & crores
etc. IJIRA - Kolkata building exist

In addition, the following textile clusters may also be considered for CEFCs, in case the
feasibility for any one of the above 5 proposed CEFCs locations doesn’t match.

Table 13.3: Additional Locations of 2 CEFCs in India

SN Other Greenfield/ Focus Segment Proposed CEFC DPR Status

CEFC City Brownfield Partner
1 Tirupur Greenfield Processing/ Home Tirupur Cluster & Concept Note
Furnishing etc. Finovista Prepared
2 Ludhiana/ Greenfield Knitting/ Hosiery/ Ludhiana Cluster To be prepared
Jalandhar Garmenting etc. & Finovista

Recommendation: It is strongly recommended that stakeholder visits & consultations be

organized under the aegis of MoT and DHI in which officials from both the Ministries should
be present. The local industry associations, universities, or colleges can be brought into
dialogue to identify and create relevant database to finalize a needful CEFC location. TMMA
can be assigned to coordinate on these consultations in due guidance from both MoT & DHI.

13.2 Two Center of Excellences (CoEs):

The IIT Delhi & CMTI Bangalore were chosen as the CoEs with a proposed budget of Rs. 300
crores. Both of these institutions have been working on a number of projects with MoT, DHI
& DIPP on the development of various textile and textile machinery related technologies. A
budget outlay of Rs 300 crores is being suggested for the technological capacity and R&D skill
building of these institutions.

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14.0 POLICY SUPPORT

Apart from the immediate fiscal incentives the Government needs to bring out further
changes in the different policy measures.

14.1 Government Policy

a) Fiscal Policy measures

i.Customs Duty– Recently, 15 dedicated components for hi-tech equipment (mentioned

below) of shuttle-less rapier loom, air-jet loom, waterjet loom, compact spinning frame, &
automatic cone winding machine were reduced to 0% to promote Make in India. Likewise,
in some other critical components the duty can be brought to ‘Nil’.

Table 14.1: List of Critical Components Exempted from Import Duty

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 However, the prevailing customs duty of 7.5% in general & 10% (detailed in Annexure – 2)
for specified machinery should be sustained to counter the cheap dumping from China and
nearby countries. Specifically, under RCEP negotiations the sector should not be allowed
duty free import.

ii.Income Tax Exemption on in-house R&D – There used to be an IT exemption of up to 200%

of the total R&D expenditure by any Indian company in any fiscal year, till 2015-16 for doing
in-house R&D. In the finance bill introduced in the year 2016, the weighted income tax
deduction u/s 35(2AB) was decreased from 200% to 150% effective from 1st April 2017 till
31st March 2020, after which it will be reduced further to 100% only. Therefore, it is
recommended that the income tax exemption limit should be increased to 200% for such
R&D. It should also be allowed to the textile machinery manufacturers where the ownership
structure is sole proprietorship and partnership as well. (See Annexure – 3 for details)

b) Import of Used/ Second-Hand machinery- To further restrict the import of used machines,
the words such as "refurbished/ reconditioned/ retrofitted" must be added in the definition
of 'Second-hand/ Used Machine' imports under the ATUF Scheme. However, a number of
second-hand machineries are being imported via Singapore, Thailand, Malaysia and other
SAARC or ASIAN countries under special trade preference agreements signed with those
countries by India. Therefore, even the 7.5% custom duty goes to 0% in a number of cases
making the issue of used machinery import even graver. (See Annexure – 4 on General
Exemption on Custom Duties)

Hence, there should be no duty-free import of second-hand machinery like that in the
automobile sector in India. Its noteworthy that China imposed restrictions on import of
second-hand textile machinery decade back to encourage its local industry, whereas in India
TUF Subsidy used to be given on import of used machines. Therefore, it is recommended such
imports should have at least 30% import duty. (See Annexure – 5 on impact of TUF subsidy
on used weaving loom import)

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 Revenue implication: if the duty on used machinery is increased to 30.0% from 7.5% currently

Average % of overall second-hand textile machine import = 7% (2015-16 base year)

Total annual import value of textile machinery = Rs. 10,000 cr

Hence total second hand import value = Rs. 700 cr

If the Import Duty is increased from 7.5% to 30.0%

Additional import duty of 22.5% earned on this import = 22.5% of RS. 700 cr

Thus, the additional revenue earned per annum is = Rs. 157.5 cr

c) Foreign Trade Policy

i.Rectify Export Promotion Capital Goods (EPCG) Scheme – The Foreign Trade Policy 2015-
2020 of Government of India has a scheme called EPCG Scheme (under Chapter-5) to
facilitate import of capital goods by Specified Importers at ‘zero duty’ for producing quality
goods and services to enhance India’s manufacturing competitiveness. (See Annexure – 6
for detail).

Table 14.2: EPCG Scheme - Good Objective with Bottlenecks

SN EPCG Guideline Bottleneck

1 Imports under EPCG Scheme are subjected to an Export A number of times the EPCG license
Obligation (EO) equivalent to 6 times of duties, taxes and cess holder finds problem in fulfilling this EO
saved on capital goods, to be fulfilled in 6 years reckoned from for which we seek extension.
date of issue of Authorization/ License to the importer.
2 The Importers are required to submit Bank Guarantee (BG)/ Until the EO is fulfilled, the BG (against
Bond which shall be equivalent to the duty saved. recurring/fixed deposits) by the
importer blocks the essential working
capital in cases of SMEs.
3 The importer at the time of clearance of the said CG is Both of the above exercises become
supposed to produce to the Assistant Commissioner of cumbersome at the time of application
Customs or Deputy Commissioner of Customs a ‘Certificate’ for duty exemption and at the time of
from the licensing authority (DGFT) for having executed a document submission for fulfilling EO to
bond; and an ‘Undertaking’ or ‘Declaration’ binding himself to release the ‘Bank Guarantee’. It involves
pay on demand an amount equal to the exempted duty, in case multiple visits by the industry and
he doesn’t fulfill the EO. transaction cost.

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 On the other hand, the 100% ‘Export Oriented Units’ (EOUs) (under Chapter-6) are allowed
to import All Goods at ‘zero duty’ for the similar purpose by fulfilling just an ‘Undertaking
Letter’. There is no EO or bank guarantee required from them to furnish their obligations.

ii.Indigenous Sourcing of Capital Goods and benefits to Domestic Supplier – A person holding
an EPCG authorisation may source capital goods from a domestic manufacturer. Such
domestic manufacturer shall be eligible for ‘deemed export’ benefit under paragraph 7.03
of FTP. Such domestic sourcing shall also be permitted from EOUs and these supplies shall
be counted for purpose of fulfilment of positive NFE by said EOU as provided in Para 6.09
(a) of FTP.

iii. Deemed Export: “Deemed Exports” refer to those transactions in which goods supplied
do not leave country, and payment for such supplies is received either in Indian rupees
or in free foreign exchange.

As per the FTP 2015-20, the Government may decide from time to time certain specified
products supplied indigenously (with some import content) as ‘Deemed Exports’, to provide
a level-playing field to domestic manufacturers. (See Annexure – 7 for detail)

Solution: It is recommended that since the domestic supplies of such EPCG license holders
are recognized as ‘deemed exports’ under the EPCG Scheme. Therefore, such imports under
EPCG scheme should be treated at par with EOU’s by eliminating mandatory ‘Bank Guarantee’
(BG). Only an ‘Undertaking’ or ‘Declaration’ should be sufficient. This will encourage import
substitution and provide a level playing field to the industry.

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14.2 FDI promotion and acquisition of technical knowhow:

Establishment of a TEI-SEZ or a Cluster in Western/ Southern India to provide land and ready
infrastructure to prospective textile machinery and accessory manufacturers

▪ Fiscal incentives such as import of all critical parts and components at zero % duty and
tax holiday for 10 years

▪ Include selected textile machinery and components for entitlement of export incentives
under a new category for export promotion of Hi-tech products from India

▪ Enforcement of IPR which is a key factor of success for Western OEM‟s

▪ Allocation should be made to provide financial assistance to Indian textile machinery

manufacturers to seek joint ventures.

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ANNEXURE 1- EXPORTS OF INDIAN TEI

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ANNEXURE 2- PREVAILING CUSTOMS DUTY & INDUSTRY RECOMMENDATIONS

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 ANNEXURE 3-GUIDELINES FOR APPROVAL OF IN-HOUSE R&D CENTRES- DSIR U/S 35(2AB)

http://www.dsir.in/blog/index.php/2017/09/25/new-guidelines-for-approval-of-in-
house-rd-centres-and-submission-of-report-under-section-352ab-issued-year-2016/

New guidelines for approval of in-house R&D centres and submission of report under
section 35(2AB) issued year 2016
In Brief

The Department of Scientific and Industrial Research (DSIR) has recently issued new
guidelines dated July 2017 for approval of in-house research and development (R&D) centres
and submission of the prescribed report under section 35(2AB) of the Income-tax Act, 1961
(the Act).

Recently in 2016 finance bill, Indian industry has faced a decrease of weighted tax deduction
u/s 35(2AB) from 200% to 150% effective from 1stApril 2017 till 31st March 2020, after which
it has proposed to phase out this deduction to 100% only.

While the new guidelines are broadly in line with the extant guidelines issued in 2014 and
CBDT amendments, there are a few additional conditions specified with regard to the claim
of weighted deduction under section 35(2AB) of the Act.

The additional conditions and amendments are as under:

Amendments to the policies and documents:

1. There have been no changes in company’s eligibility for approval, however, there have been
few changes in Conditions (subject to which approval is given), the same are stated as under:

Points Earlier (May 2014) New (July 2017) Explanation

Now the Annexure-IV has Format of the annexure has

Annual R&D expenses
Point no been changed to Section-C been changed with FORM
needs to be submitted
4 (iv) of the guidelines as 3CLA added into the Section as
as per Annexure IV
Annexure II amended by CBDT

Point no “quality control, tool “quality control, tool room Any R&D manpower engaged
4 (x) room etc. incurred on etc. and expenses incurred in non R&D activities (as
such functions as on manpower engaged in stated) is not going to qualify
attending meetings non R&D activities such as for claim.

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 providing attending consultation
advice/directions, meetings, ascertaining
ascertaining customer customer choice/response
choice/response to to new products under
new development and other
liaison work shall not
qualify”
products under
development and
other liaison work
shall not qualify”

“Capitalized expenditure of
intangible nature and Company now cannot show
Point expenditure reported as any R&D fixed assets as Work
Not available
4(X) Capital Work in Progress in progress in R&D and can get
(CWIP) will not be eligible claim of it
for weighted deduction”

Manpower under the

Manpower under the
category of retainer ship /
category of retainer
trainees/ consultants and
ship/consultants and Manpower designated as
manpower on contract
Point no manpower on a “Trainee” in R&D are not
(may include trainees
4 (xiii) contract will not be allowed for weighted tax
based on employment
admissible for deduction
status) will not be
weighted tax
admissible for weighted tax
deduction.
deduction.

There has been doubt in

No comment on R&D Vehicle under R&D are not industry to claim the vehicle
Other
vehicle allowed.0 used for R&D or not. The same
has been disallowed now.

There has been an addition of new rule where company have more than 1 Cr. Expenses in
R&D preceding to the F.Y. in which company applied for approval, is stated as under:

1. Submit the request for claim of such expenditure in the covering letter at the time of
application in Form 3CK for approval u/s 35(2AB) of IT Act, 1961.
2. Provide complete breakup & details of capital equipment investment on R&D of more than
Rs one Crore excluding expenditure on land and building, in the financial year preceding the
year in which the firm applied to the prescribed authority for the approval.

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 However, experts at SCPL were already following such practices while submitting these kinds
of claims. There have been procedural changes where DSIR has changed the PART B and PART
C of the FORM 3CK and asking additional information as Annexure I for each R&D centre.

Key take-aways-:

• Form 3CK format has been changed, in Part A, PART-B, Part- C

• Additional information needs to be submitted along with approval application as Annexure I
for each R&D centre separately
• Annexure V which was earlier for seeds companies has been changed to Annexure III.
• Annexure III, earlier it was additional information as DSIR application has been merged with
Annexure I as an appendix.
• For Submitting R&D annual expenditure companies now have to submit Annexure II and
Annexure III of Section-C DSIR guidelines.
• Draft of FORM 3CL also has been changed and now has been divided into two parts.
• Apart from Auditor certificate company now has to submit FORM 3CLA as given by CBDT after
getting signature by statutory auditor.
• Clarity on procedure for claiming “more than one crore expenses clauses”

To sum it up, all the changes are welcome but there has been no update on electronic
submission of these documents as DSIR website has come online recently after more than 6
months of maintenance work. The amendments to guidelines are going to provide stringent
conditions for eligibility of expenditure and giving more clarity towards process. Clarity on
procedure for claiming “more than one crore expenses clauses” are welcome.

The new guidelines can be accessed from the following link:

http://dsir.gov.in/index.html#files/12plan/bird-crf/FI_G_2016_E.html

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ANNEXURE 4- EXTENT OF TARIFF EXEMPTION ON IMPORTS FROM DIFFERENT COUNTRIES

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ANNEXURE 5- IMPACT OF TUF SUBSIDY ON USED LOOMS IMPORT (BEFORE & AFTER)

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ANNEXURE 6- EPCG SCHEME – CHAPTER 5- FTP 2015-20

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ANNEXURE 7- DEEMED EXPORTS – CHAPTER 7- FTP 2015-20

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----------------------------------------------------------End of the Document-----------------------------------------------

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