To provide encouragement to textile industrial units (including units in the Cotton Ginning and Pressing sectors) in the small scale sector for taking up technology upgradation and to modernise their production facilities. The scheme envisages interest incentive of 5 percentage points on the loans availed by small scale units from eligible Primary Lending Institutions (PLIs) for undertaking technology upgradation / modernisation. New units being set up with technology as per the guidelines of the scheme would also be eligible for the above incentive.

However, availment of Refinance from SIDBI is not compulsory in respect of SFCs, Scheduled Commercial Banks and select co-opted Co-operative Banks. In case Refinance is availed from SIDBI, such proposals shall conform to norms and parameters stipulated by SIDBI in addition to the guidelines prescribed by GoI.

Assistance under the scheme would be available for installation of specified types of machinery (to fall in line with definition laid down by Government of India (GOI) for technology upgradation) in a new unit or in an existing unit by way of replacement of existing machinery and / or expansion will be eligible for coverage under RTUF scheme (details of list of machinery are furnished in Section 4 of Technology Upgradation Fund Scheme booklet issued by GOI)

i] The following investments will also be eligible to the extent necessary for the plant and equipment to be installed for Technology Upgradation and the total of such investments will not normally exceed 25% of the total investment in such plant and machinery:  

a) Land and factory building including renovation of  factory building and electrical installations.

b) Energy saving devices

c) Effluent treatment plant (ETP)

d) Water treatment plant for captive industrial use

e) Captive power generation