Business & Policy | News & Insights

Government Planning to Modify Textile PLI Scheme to Attract Increased Private Sector Participation

Published: November 14, 2023

After receiving a somewhat lukewarm response from private players, the government is taking steps to enhance the appeal of the production-linked incentive (PLI) scheme for textiles.

The aim is to attract greater investment and boost manufacturing in the labor-intensive sector. To achieve this, the textiles ministry has sought Cabinet approval to expand the scheme by including more product lines. Launched two years ago, the scheme initially targeted the domestic manufacturing of man-made fabric garments and technical textiles, with a budget of Rs 10,683 crore.

Man-made fabric consists of materials like viscose, polyester, and acrylic, all of which are chemically derived. Currently, man-made fabric apparel accounts for one-fifth of India’s apparel exports.

On the other hand, technical textiles are a modern form of textile that can be utilized in various sectors such as aviation, defense, and infrastructure and for producing personal protective equipment, airbags, and bulletproof vests. In an effort to make the scheme more adaptable, the government is seeking to extend the harmonized system (HSN) codes of man-made fabric, thereby covering a wider range of textile categories.

This move is considered essential due to the dynamic nature of the textile industry, which constantly undergoes fashion changes and fluctuations in fabric demand. By offering greater flexibility in the scheme, the government hopes to rectify the confusion between artificial and natural fibers that arose from the initial fixing of the codes.

The expectation is that these changes will attract more applications and investment proposals. The scheme’s guidelines were first released in December 2021, and despite receiving 64 applications with commitments worth around Rs 6,000 crore, several players are now backing out due to adverse export markets and lack of expertise in man-made fabric and technical textiles.

Consequently, the ministry has extended the deadline for fresh applications until the end of December. Furthermore, the government is in the process of seeking Cabinet approval for a second iteration of the PLI scheme, referred to as PLI 2.0, with a specific focus on the apparel segment.

This updated version will pay special attention to micro, small, and medium enterprises (MSMEs) by reducing the investment limits to Rs 50 crore and Rs 25 crore under Part 1 and Part 2, respectively. Unlike PLI 1.0, which primarily focuses on man-made fabric, PLI 2.0 will be fiber-neutral, considering both natural and synthetic fibers.

The government hopes that by not neglecting the traditional cotton-based market, they can maintain their standing in this sector. Funding for PLI 2.0 will be sourced from the unutilized funds from the first phase, totaling nearly Rs 4,000 crore.

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