The government plans to increase the flexibility of the production-linked incentive (PLI) scheme for textiles in order to attract investment and support manufacturing in the labor-intensive industry, following the lacklustre response from private players.
The Cabinet's consent has been requested by the textile ministry in order to expand the program's product ranges.
With a financial commitment of Rs 10,683 crore, the project was introduced two years ago with the goal of increasing domestic manufacturing of technological textiles and apparel made of man-made fabric (MMF).
Conversely, technical textile is a modern textile that finds application in the aviation, defence, and infrastructure industries as well as the production of airbags, bulletproof vests, and personal protection equipment (PPE).
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.
According to the source, the decision to allow for flexibility in HSN codes was made since the textile sector is dynamic and always evolving in terms of both trend and fabric demand.
Therefore, restricting incentives to a small number of textile categories is not wise.
"Errors occurred during the code correction process, causing confusion between artificial and natural fibres. We received input on this from industry participants,” stated PLI Commmittee member, adding that if the adjustments were made, the government anticipated receiving more applications and investment proposals.
The scheme's parameters were initially made public by the textiles ministry in December 2021. Of the 64 applications the government had received, only about Rs 6,000 crore had been committed to.
A year later, seventy-eight players are pulling out, citing unfavourable export markets and insufficient experience as reasons for their lack of enthusiasm for investing in technical textiles or MMF.
The government agreed earlier this month to extend the deadline for accepting new applications for the programme until December 31.
Entry of PLI 2.0
With an emphasis on the garments market, the government is currently seeking cabinet approval for a second version of the PLI programme for the textile industry.
Micro, small, and medium-sized enterprises (MSMEs) will receive special attention in the second edition of the programme, as Part 1 and Part 2 investment limitations would be cut to Rs 50 crore and Rs 25 crore, respectively.
While PLI 2.0 will be fiber-neutral and suitable for both natural and synthetic materials, PLI 1 focused on MMF.
Although our prior version's emphasis on MMF was commendable, we also don't want to lose momentum in our conventional market, which is heavily dependent on the cotton industry," the aforementioned source stated.
The funds left over from the first phase will be used to finance PLI 2.0. It is almost four thousand crores rupees.