PLI Scheme for Textiles Manufacturing in India

The Production-Linked Incentive (PLI) Scheme for Textiles aims to boost India's manufacturing capabilities and exports in the sector, with a specific focus on manmade fibre (MMF) apparel, MMF fabrics, and technical textiles. By providing financial incentives, the scheme aims to promote the production of these textile products within the country, enabling the industry to achieve greater size and scale. The primary objectives of the PLI Scheme are to enhance the competitiveness of the Indian textile industry in the global market, foster the growth of domestic manufacturing, and create employment opportunities. By supporting the production of MMF apparel, MMF fabrics, and technical textiles, the scheme aims to catalyse the development of a robust and globally competitive textile sector in India. The PLI Scheme seeks to establish a favourable ecosystem for textile manufacturers by encouraging investment, innovation, and adoption of advanced manufacturing technologies. It aims to support the creation of viable enterprises that can compete on an international level, contribute to the growth of the Indian economy, and generate employment opportunities for the population.

Some Key Features of the Scheme are:

• With an approved outlay of ?10,683 crore, the government has introduced the PLI Scheme to facilitate the production of manmade fiber (MMF) apparel, MMF fabrics, and technical textile products in India.
• The primary objective of the scheme is to enable the textiles industry to achieve significant growth in terms of size and scale while enhancing its competitiveness.
• The PLI Scheme, which came into effect on September 24, 2021, will remain operational until March 31, 2030. The incentives provided under the scheme will be applicable for a period of 5 years.

Calculation of Incentives

There are two parts to the method of calculating and awarding incentives to a company –

• Part 1 - To be eligible for incentives under this part of the scheme, a person or company must invest a minimum of 2300 Crore in plant, machinery, equipment, and civil works. They should form a separate company under the Companies Act, 2013 and achieve a minimum turnover of 2600 Crore by manufacturing and selling the notified products. The company will be eligible for a 15% incentive in the initial year once it attains the specified turnover. Subsequent incentives will be granted if the company achieves a minimum additional incremental turnover of 25% each year up to the fifth year. However, the percentage of the incentive will decrease by 1% every year from the second year to the fifth year. Incentives will only be calculated based on sales conducted through regular banking channels.
• Part 2 - Under this part of the scheme, any person or company willing to invest a minimum of ?100 Crore in Plant, Machinery, Equipment, and Civil Works (excluding land and administrative building cost) for producing notified products is eligible to apply. The company should be registered under the Companies Act, 2013, before making the investment. To qualify for incentives, the company must achieve a minimum turnover of ?200 Crore by manufacturing and selling the notified products. The incentives are contingent on meeting both the minimum investment and minimum turnover requirements. Upon reaching the necessary turnover in MMF and Technical Textiles, the company will be granted an 11% incentive. In the following years, incentives will be determined by achieving a minimum additional incremental turnover of 25% compared to the previous year, up to the fifth year. However, the incentive percentage will decrease annually by 1% from the second year to the fifth year, culminating in a 7% incentive in the fifth year. Only sales conducted through regular banking channels will be taken into account when calculating the incentives.

Eligibility

• The applicant, whether an individual, partnership, or corporation, must be prepared to invest at least ?100 Crore in Plant, Machinery, Equipment, and Civil Works (excluding the cost of land and administrative buildings) for the purpose of producing the products specified under the scheme.
• The applicant must form a company registered under the Companies Act, 2013, before commencing the investment under the scheme.
• The participating company will qualify for incentives upon reaching a minimum turnover of ?200 Crore through the manufacturing and sale of the products specified under the scheme.
• It is important to note that both the conditions of minimum investment and minimum turnover need to be met in order to qualify for the incentives provided under the scheme. The participating company is expected to achieve the required turnover after a gestation period of two years, with the first year being FY 2024-2025.

Overall Challenges Involved

Recipients of incentives under the PLI scheme for textile manufacturing in India may face some challenges in meeting the eligibility criteria and achieving the incremental sales targets. Some of these challenges include-

• Meeting the minimum investment requirement of ?100 Crore in plant, machinery, equipment, and civil works can be a significant financial challenge for some companies. Arranging the necessary funds and managing the investment within the specified timeframe can pose difficulties.
• The scheme requires participating companies to achieve a minimum turnover of ?200 Crore by manufacturing and selling the notified products. This may pose a challenge, especially for new or smaller companies, as it requires effective market penetration, establishing a robust distribution network, and attracting sufficient demand for the products.
• Adhering to the guidelines and compliance requirements set forth by the scheme can be a complex and time-consuming process. Recipients need to ensure that they meet all the necessary criteria, maintain proper documentation, and fulfil reporting obligations to avail and retain the incentives.
• The textiles industry is highly competitive, both domestically and globally. Recipients of incentives need to navigate through intense competition, keep up with evolving market trends, and deliver high-quality products at competitive prices to sustain growth and profitability.
• The scheme emphasizes the production of products in the notified lines of MMF and technical textiles. Implementing advanced technologies, upgrading manufacturing processes, and adopting innovative techniques may require additional investments and expertise, posing challenges for some recipients.
• The textiles industry is influenced by market demand and economic fluctuations. Recipients may face challenges in predicting and adapting to changing market conditions, managing supply chains, and addressing the demand-supply dynamics effectively.

The Production-Linked Incentive scheme for textiles aims to boost India's manufacturing capabilities and exports in the sector. By providing financial incentives to eligible companies, the scheme encourages investment, promotes growth, and enhances the competitiveness of the textiles industry. However, participants must meet the minimum investment and turnover requirements and comply with the scheme's guidelines. While there are challenges, such as funding, market competition, and technological upgradation, recipients can overcome them through strategic planning, innovation, and efficient operations. Overall, the PLI scheme for textiles offers a significant opportunity for companies to expand their presence in the sector and contribute to India's textile industry's growth and development.


To learn more about how to pitch for the PLI scheme, the process of application, disbursement of incentives, the key obligations of the recipient- CLICK HERE.