India's Production-Linked Incentive (PLI) Scheme Expected to Boost Textile Industry, says Beroe Inc
The Indian government's PLI scheme aims at strengthening the domestic textile industry by incentivizing the manufacturing and exporting of specific textile products made of man-made fibre.
RALEIGH, N.C., July 28, 2021 /PRNewswire/ -- COVID-19 has made deep wounds across different industries. To mitigate its long-term impact and support their resurgence, the Indian government has taken several steps, including introducing the Production Linked Incentive (PLI) scheme for various sectors, including the textile sector. The scheme is expected to drive the production of textiles in India and find its way to the export markets. There will be incentives for manufacturing and exporting specific textile products made of man-made fiber.
"The government is considering including cotton-based products in the scheme as well, expecting to drive the demand for both natural and man-made fibers directly in the upcoming years," said Pakshaal S Shah, principal analyst at Beroe. "This scheme coupled with new agricultural laws could push up the prices of raw materials in the upcoming years."
The PLI scheme outlay is expected to be Rs. 10,683 crores, and it will be valid for five years. Depending on the size of investments and turnover, it could vary between 10 and 11 percent after meeting certain conditions. It will be trimmed by 1 percent each year after the first year and granted for five years starting FY22. This applies to 40 man-made fiber items and 10 technical textiles products. The government is also considering Cotton-based products.
India is the second-largest manufacturer of textiles and clothing globally. It also accounts for 5 percent of textiles and apparel in global trade. The production share is expected to go up with the scheme. In addition, the government has also proposed other initiatives, like a National Technical Textiles Mission, which will be at an estimated outlay of Rs. 1,480 crore (USD 211.76 million). Further, policies like the Amended Technology Up-gradation Fund Scheme (A-TUFS) are expected to enable investment worth Rs. 95,000 crore (USD 14.17 billion) by 2022.
The Production Linked Incentive (PLI) scheme aims to achieve several objectives.
- The scheme will incentivize companies for incremental sales from products manufactured in domestic units.
- It is expected to attract foreign investment in the sector and encourage domestic producers to expand their units.
- There will be an incentive that equals 11 percent of investments more than Rs. 500 crore to greenfield projects for big companies in technical textiles.
- Companies that clock annual sales of Rs. 100-500 crores will get a 9 percent incentive for brownfield projects.
- For firms with annual sales of Rs. 500 crore or more, an incentive of 7 percent will be granted in the first year if turnover is raised by 50 percent and by 25 percent in subsequent years.
To ensure that the scheme is a success, the government has planned to launch 7 mega textile parks in the next three years. The parks would be set up over 1,000 acres of land with world-class infrastructure and plug-and-play facilities. There is a prospect of adding integrated facilities that have a quick turnaround to reduce transportation time. Further, the facilities include uninterrupted water and power supply, common utilities, and research and development labs.
"The pandemic brought a lot of hardship for businesses in the textile industry. This scheme is a much-needed intervention of the government. It's ambitious and, if executed per plan, will not only support these businesses but even foster their growth," said Pakshaal S Shahof Beroe. "India's textile industry is quite resilient. And with PLI scheme and other initiatives in action, it will definitely bounce back very strongly."
For more such market insights, procurement intelligence, supplier analysis, supplier compliance and risk management, price and cost benchmarking, please log on to Beroe LiVE.Ai: https://www.beroeinc.com/beroe-live-ai/
About Beroe Inc
Beroe is the world's leading provider of procurement intelligence and supplier compliance solutions. We provide critical market information and analysis that enables companies to make smart sourcing decisions — leading to lower costs, greater profits, and reduced risk. Beroe has been providing these services for more than 15 years and currently works with more than 10,000 companies worldwide, including 400 of the Fortune 500 companies. For more information about Beroe Inc., please visit https://www.beroeinc.com/.
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