Ninety per cent of the funds will come from financial institutions while the government will undertake only the Rs 3,000-crore interest subsidy component. Among the financial institutions that will contribute for the fund are Industrial Development Bank of India (IDBI), Industrial Credit and Investment Corporation of India (ICICI) and Industrial Finance Corporation of India (IFCI).

"The modalities are almost finalised, and would soon be put up for cabinet approval," said Kashiram Rana, Union Textiles Minister. "Before the funds are available for disbursement, it is necessary that all concerned with the cotton economy take a holistic approach towards solving problems facing both, the cotton economy and the textiles industry".

Rana was in Mumbai on Saturday to inaugurate thePlatinum Jubilee ceremony of East India Cotton Association. Speaking to The Financial Express after the seminar, Rana said: "We expect a lot from the private sector for the overall improvement of the cotton economy."

However, Rana disappointed the EICA office bearers who were expecting dilution of the Essential Commodities Act (ECA) and exempting cotton from its rusty clutches as a gift from the government on the eve of platinum jubilee celebrations. Said Rana: "Cotton is a vital commodity for the entire country, wherein on the one hand we have to look after the interests of weavers and workers, while on the other, of the small weavers. Therefore, it is not possible to exempt cotton from the ECA requirements".

Earlier during the day, Rana visited the EICA's trading hall at Cotton Green, Mumbai's central suburb. EICA has been allowed to begin futures trading in cotton and awaits clearance from the Forward Market Commission.Said Rana: "Yesterday (Friday) at a meeting of secretaries of all concernedministries, including finance and agriculture (for TUF), we have discussed all the related issues TUF, wherein it was agreed that NABARD may be selected for disbursing the TUF. "Before finalising the name, we intend to ensure smooth disbursal of the funds. If for whatever reasons we are not satisfied, we may set up a separate new agency (for the purpose) of which we feel confident."

"All the leading financial institutions have agreed to lend the funds, which in turn will be lend to the ailing textile sector only at market rates, minus five per cent which will be borne by the government as interest subsidy. However, we await suggestions even from the industry as to how this should be disbursed".

As regards revival of mills under the ailing National Textile Corporation (NTC), Rana said "we may consider to revive the viable mills, for which a high-level committee will submit its reports by August this year".

According to Rana: "If we want to compete in the international textiles and cotton markets, it isnecessary that we upgrade our activities. For this, we intend to adopt the Chinese pattern of completely scrapping the old junk machinery in the mills and help the owners to replace them at the earliest with new imported machines. It is in our own interest that we gear up faster before all the quantitative restrictions that hamper the growth of textiles industry are removed before 2005 as required under the GATT agreements."Earlier, delivering the chief guest's address, Rana said: The government is greatly concerned about the consistent decline in both cotton production and per hectare yield, which is the lowest in the world.

This should be a matter of concern even for the industry for, their fate depends upon a healthy cotton economy."

During 1997-98, the total acreage under cotton has declined to 88.68 lakh hectares against 91.66 lakh hectare in the previous year. The per hectare yield too has declined to around 290 kg per hectare, against over 600 kg of Israel. The total cotton production fell sharplyto 148 lakh bales during the current cotton year 1997-98 as against a high of 177.20 lakh bales for the corresponding period last year, the minister said adding that the for this fiscal the cotton advisory board has estimated a production of 153.25 lakh bales.

"That the cotton farmer does not get remunerative prices for sowing cotton despite high cotton prices in the market, is obvious from these figures," Rana said. "Weakness prevailing in the domestic cotton economy has to be addressed at the earliest jointly by the government and the industry. While the government is doing its bit to help improve the cotton economy, we want the industry to come forward with its own suggestion in this regard."

Rana said futures trading would be resumed in ginned and baled cotton. EICA has been permitted for cotton futures. Rana therefore, urged the cotton trade to play a responsible role in developing this form of trading.

Warning EICA on its efforts to initiate cotton futures after almost 30 years, Rana said:"Futures are good for cotton trade. However, before they are allowed it will be necessary to lay down strict rules of discipline -self discipline is the best form of discipline -- and see that the futures trade is not in the hands of speculators. Try to do away with possible malpractices, so that the full benefits of futures percolate to the industry and cotton growers."

On the question of removal of controls on cotton, Rana said there was need for assured and abundant supply every year and "we have to balance the interests of the growers and the consumers".

Describing as unfortunate the recent suicides by cotton farmers in Andhra Pradesh, he said it was a matter of concern for the government and added that the lot of the farmers has to be improved by enabling higher production and productivity so that they get a greater income.

Rana said there was a need for more good quality seeds to improve productivity.