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Govt may relax key criteria to sweeten textile PLI 2.0

Even before the pandemic struck, textile and garment exports shrank 8.6% year on year to $33.7 billion in FY20.

Govt may relax key criteria to sweeten textile PLI 2.0
The Centre had launched the first PLI scheme for only technical textiles and man-made fibre-based players who were willing to commit large-scale investment of at least Rs 100 crore and annual turnover of Rs 200 crore each.

The government will likely relax two of the most critical criteria when it launches the second production-linked incentive (PLI 2.0) scheme for the labour-intensive textiles and garment sector, acceding to industry requests. It could allow cotton-based players to take advantage of the scheme, and drastically reduce the turnover and investment limits to enable even medium enterprises to set up units under it, sources told FE.

The Centre had launched the first PLI scheme for only technical textiles and man-made fibre-based players who were willing to commit large-scale investment of at least Rs 100 crore and annual turnover of Rs 200 crore each.

In the new PLI scheme for the sector, the minimum investment will likely be as low as Rs 15 crore for companies to qualify for the incentives. There could be two other investment brackets -Rs 30 crore and Rs 45 crore. The annual turnovers have to be double of the investment limits. However, the maximum incentive may be kept at 10%, against 15% in the PLI1.0.

Of the Rs 10,863 crore allocated last year for the PLI scheme for the textiles and garments sector (for a five-year period), the incentive offtake under the first programme is expected to be about Rs 6,013 crore. This leaves the scope for another PLI scheme for the sector.

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Under the PLI 1.0, the government has already selected 61 companies – including Shahi Exports, Arvind Mills, Gokaldas Exports and Monte Carlo – under its first PLI scheme for man-made fibre and technical textiles products. Incentives of Rs 6,013 crore will be extended to them over five years.

“It (PLI 2.0) is still at the draft stage. Stakeholders are being consulted. A final decision will be taken in due course,” said an official source.

The textiles and garments sector, comprising mainly MSMEs and dominated by cotton-based players, has been seeking the inclusion of cotton players, along with a reduction in high turnover and investments limits, in the PLI scheme, to benefit a wider pool of businesses.

These demands, however, go against the government’s initial intent of luring mainly large companies to create few champions in key sectors through various PLI schemes. In textiles and garments, it also seeks to correct India’s historical policy bias towards cotton-based value chain that is, in fact, contrary to the global consumption pattern. The idea is to reclaim India’s export markets after ceding substantial ground to Bangladesh and Vietnam in recent years.

But the likely change in the government stance comes from the realisation that its first PLI scheme for the sector kept out a significant number of players, mainly MSMEs. Given the employment potential of the sector, the government is considering the change, said the sources.

Commerce, industry and textile minister Piyush Goyal had in June said the government was planning to roll out the second PLI scheme following good response to the first such programme.

Even before the pandemic struck, textile and garment exports shrank 8.6% year on year to $33.7 billion in FY20. As such, the sector’s share in the overall merchandise exports has been sliding consistently in recent years, having dropped from as much as 13.7% in FY16 to just 10.8% in FY20, the lowest in around a decade. Last fiscal, such exports jumped by 41% to about $43 billion, albeit on a contracted base. However, such exports have come under pressure this fiscal, given the slowdown in key markets such as the US and the EU. They dropped over 4% on year until August this fiscal to almost $16 billion.

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