PLI Scheme a shot in the arm for MMF & tech textiles.

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On November, 2020, The Union Cabinet gave its approval to extend the Production- Linked Incentive (PLI) scheme to textile products along with nine other new sectors entailing additional financial outlay of Rs 1460 billion over a 5-year period.

For textiles, the PLI scheme, with financial oMMF & tech textiles.MMF & tech textiles.utlay of Rs 106.83 billion, will be applicable for manmade fibre (MMF) segment & technical textiles, and will be implemented by the Union Ministry of Textiles. “The textiles industry plays a big role in India’s economy by contributing 2 per cent to the GDP and employing more than 45 million people. In spite of some signs of demand pick-up in the recent months, companies (especially micro, small and medium enterprises) are still under severe financial stress due to Covid 19 pandemic. We welcome the government’s move to include textile products in the PLI scheme as it will give a fillip to the industry,” said Ashok Juneja, National President, The Textile Association (India).

The Indian textile industry is one of the largest in the world and has a share of about 5 per cent of global exports in textiles and apparel. But India’s share in the manmade fibre segment is low in contrast to the global consumption pattern, which is majorly in this segment. The PLI scheme is likely to attract large investment in the sector to further boost domestic manufacturing, especially in the MMF segment and technical textiles.

Traditionally, India has been missing a larger basket of exportable products since the majority of global trade happens in MMF-based products. Also, so far cheaper MMF and garment imports dominated Indian markets. “With the PLI scheme, there will be a tactical shift happening to man-made fibre-based garments which will open up a lot of opportunities for export as well as domestic market. Since the maximum positive impact will be felt in the labour-intensive garment-making sector, there will be many new jobs created. I expect that more investments will happen in creating new capacities in man-made fibre-based textile products and also in the technical textiles since both sectors have the potential of exports and import substitution. The PLI scheme will help the industry in becoming globally competitive and can also attract foreign investment. This scheme offers our traditional textile industry an opportunity to contribute towards building an Aatmanirbhar Bharat. As per a study, carried out by Gherzi for SRTEPC (The Synthetic & Rayon Textiles Export Promotion Council), the global mill consumption of fibres was 108 million tonnes dominated by MMF (mainly filaments) with 70 per cent share. Whereas in India, cotton still occupies 70 per cent share of the fibre consumption, with significant scope for penetration of MMF.

“India’s exports of MMF textiles at $ 6.1 billion in 2018 (4 per cent of global trade) also have further potential to grow. The Indian technical textiles market estimated at $ 18.1 billion in 2018 has been growing at 13 per cent CAGR, representing a tenth of the global technical textile industry and with promising growth prospects,”.

PLI scheme is expected to encourage the industry to make investment to improve manufacturing capabilities and boost exports by focusing on high value-added products. However the optimism should be tempered with caution due to prevailing sentiment in the global textile industry and unique characteristics of the two segments (MMF and technical textiles). “First, the incentive applies only to incremental investment and sales turnover vis-a-vis base year (2019-20). For the nascent technical textiles segment the gestation period to ramp up the project to an optimum capacity utilization is longer than conventional textiles due to the production of prototypes, requirement for certification and statutory approvals from buyers. It takes between 12-18 months to ramp up capacity to 85%. It is expected that the policy guidelines will take into account these unique features for incentive to be effective. All said, the recognition of the need for Indian textile industry to diversify is a welcome step.