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Tuesday, October 19, 2021

Explained: How the PLI scheme for textiles works

The scheme is incentivising production of 14 categories of MMF fabrics, 10 categories of technical textiles and MMF apparel.

Written by Karunjit Singh , Edited by Explained Desk | New Delhi |
Updated: September 29, 2021 2:18:55 pm
Textiles. The MMF fabrics for which production is being incentivised include woven fabrics containing nylon, polyester and other manmade fibres. (File photo)

The government has notified the Rs 10,683-crore Production Linked Incentive (PLI) scheme for textiles, specifically aimed at boosting the production of man-made fibre (MMF) fabric, MMF apparel and technical textiles. We examine the details of the scheme which is set to provide incentives from FY25 to FY29.

Which product lines are being incentivised by the scheme?

The scheme is incentivising production of 14 categories of MMF fabrics, 10 categories of technical textiles and MMF apparel. The MMF fabrics for which production is being incentivised include woven fabrics containing nylon, polyester and other manmade fibres.

Technical textiles that are set to be covered under the scheme include defence textiles such as bulletproof vests, fighter aircraft and submarine clothing and tents, mobile textiles such as safety airbags and tyre cords and protective textiles such as personal protective equipment and fire-retardant fabrics and clothing.

The scheme also incentivises the production of smart textiles embedded with active devices for medical, defence, and special purposes.

MMF fabrics, apparel and technical textiles currently account for about two-thirds of the international trade in textiles, and the PLI scheme is aimed at boosting India’s share in these segments, commerce minister Piyush Goyal had said while announcing the PLI scheme.

Which producers are eligible for incentives under the scheme?

The first phase of the scheme will be open to producers that invest at least Rs 300 crore in plant, machinery, equipment and civil work (excluding land and administrative building cost). Such producers will receive incentives under the scheme once they achieve a turnover of at least Rs 600 crore.

In the second phase of the scheme, producers investing Rs 100 crore and generating a turnover of at least Rs 200 crore will receive incentives.

Projects that enhance the value of integrated fibre or yarn by at least 60 per cent in processing to fabric, garments or technical textiles will be selected under the scheme. Independent processing houses, however, will have to meet a lower value enhancement threshold of 30 per cent to be eligible for selection under the scheme.

What are the incentives for producers under the scheme?

Participating companies are expected to achieve the minimum turnover requirements after a gestation period of two years and starting FY25 are entitled to 15 per cent incentive on attaining the required turnover in the first phase of the scheme.

Incentives in subsequent years will be contingent on turnover being increased by at least 25 per cent each year up to FY29, with incentives falling by 1 per cent each year to 11 per cent in the final year of the scheme.

In the second part of the scheme, in which producers with lower investment and turnover thresholds will be selected, incentives will start at 11 per cent for the achievement of the required turnover and fall by 1 per cent each year to 7 per cent in FY29, with incentives after year one being subject to a similar condition of 25 per cent annual growth in turnover.

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