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PLI Scheme in Textile Sector

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PLI Scheme in Textile Sector

India has taken a firm step towards dominance in the global textile market with the introduction of the Production Linked Incentive Scheme. The main thrust of this scheme is to achieve the apex leverage in attaining the scale of economies. The production-linked methodology will help catapult Indian corporate companies to emerge as the top champions in the heavily crowded space of international textile competition.

Highlights

  • The PLI scheme will be instrumental in creating massive employment opportunities thus providing much-needed succor for meritorious manufacturing and service organizations. 
  • It is estimated that there will be over 3 lakh skill-enhanced jobs that will be added to the work economy. There is also the avenue of infusing Rs 19000 Crore as investments in the infrastructural developments of various medium and small enterprises.
  • The most important category of investments is the self-declared inspirational districts and all contiguous geographical areas around Tier 3 and 4 towns.
  • The direct beneficiaries of these schemes are Telangana, Andhra Pradesh, Maharashtra, UP and Gujarat: all states having a large number of inspirational cities and hardworking populations.

An important component of the Atma Nirbhar Scheme

Self-reliance is the key milestone that is integrated into the trading and operational policies of the Indian government. The ministry of textiles has floated multiple proposals that encourage trade in local markets and also give a boost to exports of textiles to other nations. The central idea is to make the artisan class rich and prosperous which was evident before the British came to India two centuries ago.

The following are the important components of the Production Linked Incentive Scheme:

  1. Budgetary Outlay

The central government has designated nearly Rs 11000 Crore to fulfill the objectives of the PLI schemes. The main covenant of the budgetary outlay is targeted towards improving the manufacturing capabilities of factory floors. 

  • The next important target for investment is the acquisition of raw materials. Acquiring raw material at a reasonable cost is one of the main parameters of profitability for small artisans. 
  • The government is focusing on enhancing the marketing skills of the textile workers so that there will be more visibility for the products.
  • The budget has earmarked Rs 1.97 crore for various important 13 priority sectors. It is expected after the launch of their Production Linked Incentive schemes, there will be much-needed momentum in the production capacities that will definitely result in an increase of good-paying jobs over the next few 5 years.

2. Introduction of High-Value MMF fabric

The net per capita income of the textile industry workers can be increased by improving the raw material. The PIL scheme intends to usher in an era where the textile mills work on high-quality fabric which meets international accreditation standards. 

Important Highlights

  • The textile mills will be comprehensively evaluated in terms of manpower and existing infrastructure. 
  • The identified units will be given a total inventory overhaul according to the policy guidelines. The employees will be given training in the latest skill development categories as being practiced in China, Thailand and the Philippines.
  • The introduction of MMF fabric will also give an impetus to the ancillary cotton industry. The natural fiber sector will see a boost in economic activity which translates into massive gains in the trade and employment sector. 

The basic idea is to rapidly scale up the economic and perceived cost of Indian textile by introducing revolutionary changes in raw material and the final product, thereby regaining the glorious status of the Indian textile industry.

Various applications across the macroeconomic scenario

New age textiles will offer increased sales in the retail stores thereby increasing the net profits which will then be trickled down to the general masses.  Apart from this, the environmental benefits of the MMF fabric are immense. The following services will hugely benefit by introducing technical textiles such as MMF fabric.

  • Water services
  • Infrastructural Up-gradation
  • Health sector
  • Hygiene across the geographical areas
  • Defense acquisitions

The government has given priority to the concept of skill-building from the grassroots level. It is the intention of the government to introduce international skills to the average textile worker by ramping up R&D efforts. The setting up of the National Textile Technical mission showcases the previous capacities of the Indian textile industry and charts out a road map as to how to best use the existing innovative methodologies to ramp up the quality of the final product.

What are the different types of investment?

There are primarily two different sets of possible investments with varying incentive structures. 

1. First Investment method

A firm or company to any individual should be willing to enter into a contract to invest at least Rs 300 Core in the following aspects:

  • Plant
  • Machinery
  • Civil Works
  • Land and Administrative costs

2. Second Part

The second part of the investments scheme requires a minimum threshold on Rs 100 Crore investments specifically in the cases of Inspirational districts, rural areas and Tier 2 and Tier 3 towns.

  • Backward areas are the first priority to improve the fortunes of the local artisans. The government of India has issued a detailed incentive list to the state governments of Gujarat, Tamil Nadu, AP, and Odisa for integrating the recent developments in the textile industry. 
  • It is estimated that in a span of 5 years there will be an additional investment of Rs 3 Lakh crore thus acting as a major driver of employment. 
  • The primary focus of the scheme is to remove the traditional barriers that prevent rural women from participating in the workforce. 
  • Women empowerment is the key for this PLI scheme with the honorable aim of reintegrating the women’s workforce in the general economy.

What are the various economic segments that will benefit from the PLI scheme?

The main target of the PLI scheme is to increase the levels of production of Man-made fabrics thus leading to the increase of manpower in one of the fastest-growing sectors of the world economy. Indian textile workers can now compete on par with the Chinese textile mills and can engage in productive ancillary activities. 

Technical textiles are getting huge fashion interest across the world. The quality of technical textiles is in huge demand in the western markets. 

The PLI scheme intends to identify the bottlenecks that are creating impediments in the production of world-class material in Indian textile mills.

As suggested by the Commerce and Textile Union Minister, Mr. Piyush Goyal insinuated that the majority of the international markets are up for grabs for the Indian domestic textile market, when there is considerable skill acquisition in the design of manmade fabric and garments. 

Exports of Indian Man-made fabric

  • The exports of Indian-made garments are expected to grow exponentially in the MMF category in the year 2021. The industry experts are on the rise and with the right government support, the real gains in the artisan economy are bound to have a ripple effect across other major aspects of the economy. 
  • The compound annual growth rate is expected to stand at 8 percent in the case of exports. The average monthly exports have seen an upward tick in the primary half of 2021 with a reported increase of $400 million dollars.  The MMF garments exports have been recently impacted by the covid pandemic.
  •  Strategic formulation of textile policy and imposition of tariffs on foreign cloth has given a breath of fresh air to the textile economy. Sustainability in the operating phases of textile development is the key parameter for seeing export growth.

Impact of Covid

The export of garments and textiles has seen a steep shortfall due to the breakdown of logistics due to the pandemic. The industry personnel is indicating optimistic growth figures as the counties are being reopened after lockdowns. The international geopolitics regarding the reopening of the world economy has also been conducive for the positive investor sentiment in the country.

Focus on Mega Textiles

Production linked shipments is a robust trade policy of GoI with the ultimate focus of increasing the textile parks in India. Making India the future textile hub of the world in a span of 10 years is the main policy directive of the PLI scheme. 

  • Mega textiles are those which are produced in a bulk category with the optimal mix of automation and manpower. The automation aspects of the factory floor can be taken care of by the grants from the PLI schemes provided the business owners chip in with the initial investments.
  • It is envisaged to construct over 40 high-quality man-made HS lines for the speedy manufacture of garments. It is noted here that extended lead times are one of the main reasons for the decrease in MMF production.
  • Adequate technological safeguards are provided in the international machinery for the manufacture of mega textiles, which are the outcomes of productive discussions with the machinery vendors and the representatives of the Indian trade body representatives. 
  • The international trade textile association is promoting the usage of mega textiles across the global markets and this sector is expected to see 7 fold growth in the last quarter of 2021.

Reduction of Custom Duty in PLI scheme

The revamp of the entire textile industry is the main objective of the PLI scheme. The biggest benefit of the PLI scheme is the reduction in the customs duty which till now has been a dampening factor for raw material importers. 

  • The MSME industry is all set to make massive gains in the areas of financial sustainability and profit generation. The GoI has boosted the input subsidies on crucial raw materials and an amount of Rs 15,700 Crore has been allotted to construct new shipping lines. 
  • Reduction of customs duty will have a stark effect on the shipping costs, thereby ensuring that the long-term survival of the central public sector industries.
  • Improvement in logistics is another great feature of the standardization of custom duties. There will be overall positive growth drivers as the PLI scheme concentrates on improving the infrastructure related to railways, shipping and highways.

What are the criteria for qualification to be considered as a beneficiary under the PLI scheme?

Qualification criteria depend on the various target segments which are briefly described as below:

a) Mobile phone category: The value of the invoice should be greater than IR 15000. The total consolidated revenue of the global manufacturing firm should be within the range of the target segment. The annual market capitalization of the interested company should be more than Rs 10,000 Crore.

b) Domestic-owned Mobile companies: The target segment should be containing companies whose consolidated global manufacturing systems should be within 100 Crores.

c) Specified electronic components category allows domestic as well as international subsidiaries with annual consolidated revenue of Rs 50 Crore.

PLI Scheme in Textile Sector FAQs:

1. Who can be considered as an applicant under the PLI scheme?

The applicant company should be registered in India and the main areas of operations should be under manufacture. The mobile phone and hardware production categories fall under the target segment category. It should also be noted that applicants are free to manufacture across the length and breadth of the country. The foreign investors of mobile phone manufacturing companies are not considered as PLI applicants.

2. What is the time frame period for making a successful application under the PLI scheme?

The scheme stipulates that the applications window for the PLI scheme will be active for duration of 4 months from the beginning from the initial day of the notification. The scheme will be announced in the Central Gazette and will be prominently displayed in the website of the Ministry of Commerce and Textiles. The duration of the scheme coincides with the peak demand for textiles across the world and the country.

3. How the consolidated revenue of the Scheme applicant can be calculated when claims are made by the applicant companies?

In case of multiple companies, the manufacturing revenue is taken as the sum total. The return claims will be equally divided among the entities.

4. How do people without familiarity with digital transactions access the features?

In case of consolidated revenue of the target company being a foreign currency denomination, the Reserve Bank of India calculations will be applied in the exchange rate. The first day and the last days of the interest tenure is calculated in between the intervening days

5. What are the eligbility criteria for selection into the schemes of PLI?

There are two modes of eligibility. The first criteria are to meet the minimum threshold of manufactured goods. To be considered as eligible under the manufacturing threshold criteria, the disbursement incentives of the PLI schemes will be taken for consideration. The target segments are evaluated irrespective of the base year after factoring in the invoice value. All mobile phones of Rs 15000 and above will be calculated under the total sales category of the PLI scheme.

6. What is the possible outcome if an applicant enterprise is not able to meet the minimum threshold criteria in a specific year?

It is advised to the applicants that in order to meet the disbursement incentive the target segment criteria should be met in any specific year. However to promote the initial phases of the scheme, it has been decided that no restrictions should be on place on claiming incentives after the threshold criteria has been met.

7. What is meant by the term Incremental investment over a certain Base Year?

It is also known as the total value of investment calculated on a cumulative basis. The Base Year of 2019-20 will be considered in case of mobile phones over the value of Rs 15000. The incremental investment is done to achieve a minimum threshold of Rs 500 Crore in case of foreign companies. The threshold limits are planned to be changed in the coming year 70 crore by 2023 and 1000 Crore by 2024.

8. Will duties and taxes included in the expenditure category considered towards the column of Scheme Investment?

Taxes and duties which fall under the non-creditable category will definitely be included in the list of expenditure items. The expenditure that is shown towards buildings is not covered under the PLI schemes

9. Can a company apply for any other incentive schemes once they are enrolled in the PIL scheme?

PLI scheme is one of a kind Textile scheme which does not affect the other incentive based schemes whether in state department or central government. The eligibility for PIL schemes is similar to other export guarantee and incentive schemes, the only difference being any new companies should be able to invest more Rs 500 core to meet the minimum threshold limit. PIL scheme ensures that all subsidiaries of multinational companies get equal reward incentive in case of optimal production parameters.

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