Govt may tweak textile PLI scheme to attract more private players

After a lukewarm response from private players, the government is set to make the production-linked incentive (PLI) scheme for textiles more attractive by offering greater flexibility under it, and this will, in turn, draw investment and bolster manufacturing in the labour-intensive sector.

The textiles ministry has sought the Cabinet’s approval to add more product lines under the scheme. The scheme was launched two years ago to boost the domestic manufacturing of man-made fabric (MMF) garments and technical textiles, with a budgetary outlay of Rs 10,683 crore.

MMF includes viscose, polyester, and acrylic, which are made from chemicals. Exporters say MMF apparel currently accounts for a fifth of India’s apparel exports.

Technical textile, on the other hand, is a new-age textile that can be used for producing personal protective equipment (PPE), airbags, and bullet-proof vests, and can also be used in sectors such as aviation, defence, and infrastructure.

“A cabinet note has been circulated to get approval for bringing more flexibility in the scheme by extending the HSN (harmonised system) codes of MMF to cover as many categories as possible,” an official aware of the matter told Business Standard.

The official said the reason for the decision to offer flexibility in HSN codes was textile as such was a dynamic industry and fashion and demand for fabrics kept changing. Hence, it’s not prudent to limit incentives to a select few textile categories.

“There were errors while fixing the codes, leading to confusion between artificial and natural fibres. On this, we got feedback from industry players,” the person said, adding that the government hoped for more applications and investment proposals if the changes were made.

The textiles ministry had first released the guidelines of the scheme in December 2021. The government had received 64 applications with commitments worth approximately only Rs 6,000 crore.

A year later, seven-eight players are backing out because they are not keen on investing in either MMF or technical textiles due to adverse export markets and lack of expertise. Earlier this month, the ministry decided to extend the date for inviting fresh applications under the scheme till December 31.

PLI 2.0

The government is in the process seeking cabinet approval for another iteration of the PLI scheme for the textiles sector, with a focus on the apparels segment. The second edition of the scheme will have special emphasis on micro, small and medium enterprises (MSMEs), as the investment limits will be lowered to Rs 50 crore and Rs 25 crore under Part 1 and Part 2, respectively.

“The focus of PLI 1 was MMF, while PLI 2.0 will be fibre-neutral as it will be for both natural and synthetic. While it is good that we focused on MMF under the earlier version, we also don’t want to lose ground in our traditional market, which is cotton-based in a major way,” the person cited above said.

PLI 2.0 will be funded by the money that has remained unutilised in the first phase. It amounts to nearly Rs 4,000 crore.