The Catch Up: On Production Linked Incentive Schemes for the Textile Sector

cabinet approval A Production-Linked Incentive (PLI) Scheme for the Textile Sector Which has been explicitly targeted at the man-made fiber (MMF) and technical textiles segments, a delayed acknowledgment by the government that ground has essentially shifted in the global textile trade. A constant change in consumer preferences and fashion trends saw MMF surpass cotton as the fiber of choice in the 1990s, as it accounted for approximately 75% of the worldwide textile consumption. On the other hand, India’s textile and clothing exports continue to be dominated by cotton and other natural fiber-based products, with MMF contributing less than 30% of the country’s $35.6 billion in overall regional exports in 2017-18 . And the share of MMFs remained relatively unchanged even in the last fiscal, when regional exports stood at around $33 billion. While policy makers have become aware of the need to increase support for the MMF segment, the task of formulating a meaningful initiative that will spur investment in capacity building, leading to an increase in exports, has been a while to come. Wednesday’s decision on the focused PLI scheme, with a budget outlay of Rs 10,683 crore, is the second time in 11 months that the Cabinet has approved broadly the same scheme, with the government using the intermediate period to incorporate amendments to the incentive structure. has done. Based on industry feedback.

The scheme aims to focus investments exclusively on 40 MMF apparel product lines, 14 MMF clothing lines and 10 segments or products of technical textiles. These 64 items have been selected for being one of the top-notch business lines in the global market as well as having less than 5% share in each of them in India. The inclusion of intermediate products at the request of the industry also reflects the government’s keenness to ensure that the scheme ultimately meets the broader policy objectives. Incentives are classified into two investment levels. Firms that have invested at least ₹300 crore in plant and machinery over two years to manufacture a specified product will need to have a minimum turnover of ₹600 crore before becoming eligible to receive the incentive over a five-year period, and At the second level an investment of ₹100 crore with a pre-determined minimum turnover of ₹200 crore will enable eligibility for incentives. At first glance, the plan appears to be well thought out, but its operational success depends on how new entrepreneurs and existing companies weigh the risk-reward equation, especially at a time when the uncertainty induced by the pandemic Is. Already prompted private businesses to undertake fresh capital expenditure.