Catching up: On Production-Linked Incentive scheme for textile sector
The Cabinet’s approval of a Production-Linked Incentive (PLI) scheme for the textile sector that is expressly targeted at the man-made fibre (MMF) and technical textiles segments is a belated acknowledgment by the Government that the ground has inexorably shifted in the global textiles trade. A relentless shift in consumer preferences and fashion trends saw MMF surpass cotton as the fibre of choice in the 1990s, since vaulting its share in worldwide textile consumption to about 75%. India’s textile and clothing exports on the other hand have continued to remain dominated by cotton and other natural fibre-based products, with MMF having contributed less than 30% of the country’s $35.6 billion in overall sectoral exports in 2017-18. And MMF’s share remained relatively unchanged in the last fiscal as well when the sectoral exports were about $33 billion. While policy makers have been cognisant of the need to bolster support for the MMF segment, the task of crafting a meaningful initiative that would engender enhanced investment in capacity creation, leading to increased exports, has been a while in coming. Wednesday’s decision on the focused PLI scheme, with a budgeted outlay of ₹10,683 crore, is the second time in 11 months that the Cabinet has approved what is broadly the same plan, with the Government using the intervening period to incorporate amendments to the incentive structure based on industry feedback.
The aim of the scheme is to specifically focus investment attention on 40 MMF apparel product lines, 14 MMF fabric lines and 10 segments or products of technical textiles. These 64 items have been chosen on account of being among the top-traded lines in the global market as well as India having less than a 5% share in each of them. The inclusion of intermediate products at industry’s request also reflects the Government’s keenness to ensure the scheme ultimately delivers on the broader policy objectives. The incentives have been categorised into two investment levels. Firms investing at least ₹300 crore into plant and machinery over two years for making a specified product would need to hit a minimum turnover of ₹600 crore before becoming eligible to receive the incentive over a five-year period, and at a second level an investment of ₹100 crore with a pre-set minimum turnover of ₹200 crore would enable qualification for the incentive. On the face of it, the scheme appears designed with a fair deal of thought, but its operational success is likely to hinge on how new entrepreneurs and existing companies weigh the risk-reward equation, especially at a time when the pandemic-spurred uncertainty has already made private businesses leery of making fresh capital expenditure.