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    PLI and other Schemes in the Textile Sector

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    Krishna Golyan

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    PLI and other Schemes in the Textile Sector

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    Krishna Golyan
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    0 views7 pages

    PLI and other Schemes in the Textile Sector

    Uploaded by

    Krishna Golyan

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    of 7

    PLI Schemes in the Textile Sector

    Key Details

    ● Launch: Announced in the Union Budget 2021-22.


    ● Target Sectors: Man-made fiber (MMF) apparel, MMF fabrics, and technical textiles.
    ● Outlay: Rs. 10,683 crore (US$ 1.45 billion)​​.
    ● Goals: To boost manufacturing of high-value MMF fabrics, garments, and technical
    textiles, and to attract global investments.

    Expected Impact

    ● Investment: An estimated investment of Rs. 19,000 crore (US$ 2.58 billion) over five
    years​​.
    ● Turnover: Expected to facilitate a cumulative turnover of over Rs. 3 lakh crore (US$
    40.66 billion)​​.
    ● Employment: Creation of over 7.5 lakh additional employment opportunities​​.

    Impact on Imports and Exports


    Export Growth

    ● Pre-PLI Baseline: In FY20, India was the fifth-largest exporter of textiles and apparel,
    with exports worth US$ 28.4 billion in 2020-21​​.
    ● Projected Growth: Exports are expected to reach US$ 65 billion by 2025-26, growing at
    a CAGR of 11%​​.
    ● Recent Trends: From April to May 2021, exports of textiles increased by 271% YoY to
    approximately US$ 6.1 billion​​.

    Imports

    ● Trends: The specifics of import trends are not detailed in the available excerpts.
    However, the increase in domestic production due to the PLI scheme is likely to reduce
    dependence on imports over time.

    Economic Impact

    ● GDP Contribution: The PLI scheme is expected to add approximately 1.7% to India's
    GDP by FY27​​.
    ● Industrial Production: The textiles and apparel sectors have shown significant recovery
    post-pandemic, with the index of industrial production for textiles standing at 112.3 in
    FY22 up to July 2021​​.
    The PLI scheme for textiles is likely to shi the gear from cotton to MMF and technical textiles.
    This initiative is expected to help push the Atma Nirbhar Bharat Mission and promote exports
    of more MMF-based textiles, since India's MMF garment industry is poised for rapid expansion
    in the coming years owing to the ease of doing business reforms and increased investor
    confidence. The PLI scheme is expected to primarily benefit Indian states such as Tamil Nadu
    that are already leading markets for textiles.

    As per the industry experts, an estimated investment of Rs. 1 crore (US$ 136.10 thousand) in
    the textiles sector has the potential to generate an estimated ~70 jobs. More production is also
    expected to generate more GST revenue, contributing to the overall development of states and
    the country.
    (PLI)_Scheme_in_the_Textile_Sector(revised).pdf (ibef.org)

    Mathematical Relation (Basis: Projected Benefits)


    ΔE=(P×I)−(C×M)

    Where:

    Variables and Assumptions

    1. ΔE - Change in Exports: This represents the net change in the value of exports due to
    the implementation of the PLI scheme.
    2. P - Production Increase Due to PLI: The increase in production capacity as a direct
    result of the PLI scheme. For FY 2024-25, this is projected to be INR 19,000 crore.
    3. I - Percentage of Production Dedicated to Exports: The fraction of the increased
    production that is expected to be exported. Based on historical data and market
    analysis, this is assumed to be 60%.
    4. C - Cost Competitiveness Factor: The reduction in production costs due to efficiencies
    gained through domestic production. This is estimated to be a 10% cost reduction.
    5. M - Reduction in Imports Due to Domestic Production: The decrease in imports as
    domestic production meets local demand. This is proportional to the increased
    production.

    Using FY 2024-25 as the base year:

    ● Projected increase in production (P) due to PLI is over INR 19,000 crore​​.
    ● Assume 60% of this production is for exports (I)​​.
    ● Cost competitiveness factor (C) is estimated to be a reduction in costs by 10% due to
    domestic production.
    ● Reduction in imports (M) is directly proportional to the increased domestic production.

    Example Calculation

    ΔE=(19,000×0.60)−(0.10×19,000)
    ΔE=(19,000×0.60)−(0.10×19,000)

    ΔE=11,400−1,900

    ΔE=9,500 crore INR increase in exports

    By increasing domestic production, a significant portion of which is dedicated to exports, the


    scheme directly boosts export volumes. Simultaneously, improvements in cost competitiveness
    (due to factors like economies of scale, better technology, and reduced input costs) further
    enhance the competitiveness of Indian textiles in global markets. The reduction in imports as
    domestic production meets local demand also contributes indirectly by stabilizing the trade
    balance.

    Recommendations for 3 Years


    1. Enhanced Financial Support and Incentives

    Rationale: Continued and increased financial support is crucial for maintaining momentum in
    investment, production, and exports.

    Outlay and Timeline:

    ● FY 2024-25: Allocate an additional INR 5,000 crore to the PLI scheme to expand its
    coverage and include more companies, especially MSMEs.
    ● FY 2025-26: Increase the budget for SITP by INR 1,500 crore to accelerate the
    completion of pending textile parks.
    ● FY 2026-27: Allocate INR 2,000 crore to incentivize innovations in sustainable textile
    practices.

    2. Investment in Research and Development (R&D)

    Rationale: R&D is critical for technological advancements, innovation in textiles, and


    sustainability.

    Outlay and Timeline:

    ● FY 2024-25: Allocate INR 1,000 crore for establishing textile research centers focused
    on MMF and technical textiles.
    ● FY 2025-26: Provide an additional INR 800 crore for collaborative projects between
    industry and academia to drive innovation.
    ● FY 2026-27: Allocate INR 700 crore for sustainability research, focusing on eco-friendly
    materials and processes.

    3. Skill Development and Capacity Building


    Rationale: A skilled workforce is essential for the efficient operation of advanced textile
    manufacturing technologies and practices.

    Outlay and Timeline:

    ● FY 2024-25: Increase funding for the Samarth scheme by INR 1,200 crore to expand its
    reach to more regions and sectors.
    ● FY 2025-26: Allocate INR 500 crore for specialized training programs in technical textiles
    and MMF.
    ● FY 2026-27: Invest INR 400 crore in digital training platforms to provide remote and
    flexible learning options.

    4. Infrastructure Development

    Rationale: Robust infrastructure is necessary for efficient manufacturing, reduced logistics


    costs, and increased global competitiveness.

    Outlay and Timeline:

    ● FY 2024-25: Allocate INR 3,000 crore for developing common infrastructure in textile
    parks, including power, water, and waste management systems.
    ● FY 2025-26: Invest INR 2,000 crore in enhancing connectivity (road, rail, and ports) to
    key textile manufacturing hubs.
    ● FY 2026-27: Provide INR 1,500 crore for setting up logistics hubs within textile parks to
    streamline supply chains.

    5. Promotion of Exports

    Rationale: Increasing exports is crucial for improving trade balance and achieving global market
    leadership.

    Outlay and Timeline:

    ● FY 2024-25: Allocate INR 1,500 crore for global marketing campaigns and participation
    in international trade fairs.
    ● FY 2025-26: Provide INR 1,000 crore for export incentives to new and emerging
    markets.
    ● FY 2026-27: Invest INR 800 crore in establishing trade facilitation centers in major export
    destinations.

    6. Policy and Regulatory Support

    Rationale: A supportive policy framework is essential for fostering growth and ensuring
    compliance with international standards.

    Outlay and Timeline:


    ● FY 2024-25: Allocate INR 500 crore for setting up a policy review committee to
    continuously assess and improve textile policies.
    ● FY 2025-26: Provide INR 400 crore for developing and implementing quality standards in
    collaboration with international bodies.
    ● FY 2026-27: Invest INR 300 crore in regulatory support and capacity building for small
    and medium enterprises to comply with global standards.

    Summary of Financial Outlays


    Year Financial Outlay (INR crore)

    FY 2024-25 12,200

    FY 2025-26 8,200

    FY 2026-27 5,700

    Schemes other than PLI in the Textile Sector

    1. Scheme for Integrated Textile Parks (SITP)

    Objective: The SITP was launched to provide world-class infrastructure facilities to textile units,
    thus enhancing the competitiveness of the textile sector.

    Key Features:

    ● Launch Year: 2005.


    ● Total Approved Parks: 59 textile parks.
    ● Financial Assistance: Up to 40% of the project cost, subject to a ceiling of INR 40 crore
    per park.

    Quantifiable Impact:

    ● Investment Attracted: Over INR 14,917 crore (as of the latest reports).
    ● Employment Generated: Approximately 79,000 jobs.
    ● Operational Parks: 22 parks have become operational, and 20 more are in advanced
    stages of completion​​.

    2. Technology Upgradation Fund Scheme (TUFS)

    Objective: To facilitate the modernization and upgradation of the textile industry by providing
    capital subsidies for investments in new machinery.

    Key Features:
    ● Launch Year: 1999.
    ● Revised Versions: Amended Technology Upgradation Fund Scheme (ATUFS) launched
    in 2016.
    ● Subsidy: 15% on capital investment in the garment and technical textile sectors, and
    10% for other segments.

    Quantifiable Impact:

    ● Investment Supported: Over INR 2,57,405 crore since inception.


    ● Employment Generated: Approximately 12.5 million jobs.
    ● Upgraded Units: Over 12,000 units have benefitted from TUFS​​.

    3. Amended Technology Upgradation Fund Scheme (ATUFS)

    Objective: To catalyze the modernization and technology upgradation of the textiles and jute
    industry.

    Key Features:

    ● Launch Year: 2016.


    ● Capital Investment Subsidy: 15% for garments and technical textiles, 10% for weaving,
    processing, jute, silk, and handlooms.

    Quantifiable Impact:

    ● Subsidy Released: INR 6,717 crore as of 2021.


    ● Investments Mobilized: Approximately INR 17,822 crore.
    ● Employment Generated: 7.9 lakh jobs created directly and indirectly​​.

    4. Integrated Processing Development Scheme (IPDS)

    Objective: To address the environmental concerns related to the textile processing sector by
    facilitating the establishment of infrastructure for water/effluent treatment.

    Key Features:

    ● Launch Year: 2013.


    ● Financial Assistance: Up to 50% of the project cost with a ceiling of INR 75 crore.

    Quantifiable Impact:

    ● Projects Sanctioned: 13 projects.


    ● Financial Outlay: INR 500 crore.
    ● Infrastructure Created: Efficient effluent treatment infrastructure leading to
    environmental compliance​​.
    5. Scheme for Capacity Building in Textile Sector (Samarth)

    Objective: To provide skill development training to workers in the textile sector to boost
    productivity and employability.

    Key Features:

    ● Launch Year: 2017.


    ● Training Target: 10 lakh persons in various segments of the textile sector.
    ● Financial Outlay: INR 1,300 crore.

    Quantifiable Impact:

    ● Persons Trained: Over 5.6 lakh individuals trained as of March 2021.


    ● Placement Rate: Approximately 70% of the trained individuals have been placed in
    relevant jobs​​.

    6. National Handloom Development Programme (NHDP)

    Objective: To promote the handloom sector by providing support for the production of handloom
    products and enhancing the incomes of handloom weavers.

    Key Features:

    ● Components: Comprehensive Handloom Cluster Development Scheme, Handloom


    Marketing Assistance, and more.
    ● Financial Assistance: Support for technology upgradation, marketing, and raw material
    procurement.

    Quantifiable Impact:

    ● Weavers Benefitted: Over 3 lakh weavers supported.


    ● Marketing Events: More than 500 domestic marketing events organized annually.
    ● Income Increase: 15-20% increase in weavers' income due to better market access and
    technological support

    (PLI)_Scheme_in_the_Textile_Sector(revised).pdf (ibef.org)
    InvestIndia_PLI Textiles_VF.pdf
    in-tax--PLI-Scheme-for-Textile-sector-Key-details-and-opportunities-noexp.pdf (deloitte.com)

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