This article is written by Mouli Mondal.
PLI (Production Linked Incentive) is a government-based incentive scheme that was announced in FY21 by Union Minister Smriti Irani. The scheme aimed to boost the Indian Man-made fibre market (MMF) via. a ₹ 10,683 crore total government incentive.
There are 2 schemes under this PLI scheme. They are scheme-1 and scheme-2. A brief introduction is provided in the following sections.
The target to be eligible for this incentive scheme will have to reach a turnover of ₹ 600 crores in 2 years. The incentive offered is 15% in the first year of eligibility, and thereafter it reduces by 1% each year for the next 4 years. But the company needs to achieve an incremental turnover of 25% each year that means if the turnover for year one is ₹ 600 crores, then the turnover for the second year should be 25 % more that is ₹ 750 crores then and only then the company will be eligible for this PLI scheme incentive.
So, a company that has invested ₹ 300 crores at the start and managed a turnover of ₹ 600 crores at the end of 2 years becomes eligible for the scheme incentive, and the first year, it will get an incentive of 15% on the turnover from the government, similarly, in the second year if there is a 25% increment in the turnover the company becomes eligible for this scheme in the 2nd year.
The incentive provided will be calculated on the difference in the turnover i.e., ₹ 750 - 600 crores which are equal to ₹150 crores. So the company would get an incentive of 14 % on these ₹150 crores unlike 1st year and this would continue for the following years.
1. The incentive schemes provide room for various companies to expand, thus providing opportunities for Jobs, upskilling, and similar related opportunities.
2. Aims to attract fresh foreign direct investment of over ₹ 19,000 crores in the sector for the production of in-demand textiles and additional turnover of ₹ 3 lakh crore over five years.
3. The boost in production will also boost the export of the industry, which in turn will benefit the government via export taxes.
The scheme offers the opportunity on creating more jobs, bringing new FDIs, enhancing exports, and creating a robust Indian textile sector that is competitive on the global front in the years to come.
References
PLI (Production Linked Incentive) is a government-based incentive scheme that was announced in FY21 by Union Minister Smriti Irani. The scheme aimed to boost the Indian Man-made fibre market (MMF) via. a ₹ 10,683 crore total government incentive.
The global man-made fibre market accounts for more than 70% of the global fibre market. The scheme aims to bolster the Indian synthetic fibre players and cement the fortitude of the Indian Textile Industry on a global front.
As of 2018, India has been the second largest producer of polyester and viscose, however, when it comes to export India ranks 5th in man-made fibre exports. This scheme aims to bridge the gap and make India a stronger man-made fibre player in the world.
(Disclaimer: This post is published here for sharing information only. Read the website https://www.texmin.nic.in/ for more information about the PLI scheme and amendments done to the scheme)
(Disclaimer: This post is published here for sharing information only. Read the website https://www.texmin.nic.in/ for more information about the PLI scheme and amendments done to the scheme)
There are 2 schemes under this PLI scheme. They are scheme-1 and scheme-2. A brief introduction is provided in the following sections.
PLI Scheme 1:
In this PLI scheme, the company should invest at least ₹ 300 crores in the plant and machinery, excluding the land and administrative cost to produce the specified product.The target to be eligible for this incentive scheme will have to reach a turnover of ₹ 600 crores in 2 years. The incentive offered is 15% in the first year of eligibility, and thereafter it reduces by 1% each year for the next 4 years. But the company needs to achieve an incremental turnover of 25% each year that means if the turnover for year one is ₹ 600 crores, then the turnover for the second year should be 25 % more that is ₹ 750 crores then and only then the company will be eligible for this PLI scheme incentive.
So, a company that has invested ₹ 300 crores at the start and managed a turnover of ₹ 600 crores at the end of 2 years becomes eligible for the scheme incentive, and the first year, it will get an incentive of 15% on the turnover from the government, similarly, in the second year if there is a 25% increment in the turnover the company becomes eligible for this scheme in the 2nd year.
The incentive provided will be calculated on the difference in the turnover i.e., ₹ 750 - 600 crores which are equal to ₹150 crores. So the company would get an incentive of 14 % on these ₹150 crores unlike 1st year and this would continue for the following years.
PLI Scheme 2:
In this scheme 2, the minimum investment required is ₹ 100 crores and then the turnover required will be ₹ 200 crores for the first year after the gestation period and the incentive offered by the government will be 11 %,10%,9%, and so on for the five years.How this scheme is considered a win-win for the textile manufacturers and the Govt.
PLI scheme offers a win-win opportunity for the Indian textile industry1. The incentive schemes provide room for various companies to expand, thus providing opportunities for Jobs, upskilling, and similar related opportunities.
2. Aims to attract fresh foreign direct investment of over ₹ 19,000 crores in the sector for the production of in-demand textiles and additional turnover of ₹ 3 lakh crore over five years.
3. The boost in production will also boost the export of the industry, which in turn will benefit the government via export taxes.
The scheme offers the opportunity on creating more jobs, bringing new FDIs, enhancing exports, and creating a robust Indian textile sector that is competitive on the global front in the years to come.
References
- Indian Manmade Fibre Textile Industry. Annual report 2018. Ministry of Textile, 2018.
- MARKET WATCH 12 JULY, 2019 - The Synthetic & Rayon Textiles Export Promotion Council
- Ahuja, Aakriti. “Indian Exports in Textile and Apparel: An Analysis for the Period 2005-2020.” SSRN Electronic Journal, 2021. https://doi.org/10.2139/ssrn.3990621.
- http://www.srtepc.org/gallery/view/102851#_Production_Linked_Incentive
- https://www.thehindubusinessline.com/economy/textiles-pli-20-may-allow-flexibility-on-mandate-to-form-new-company/article66338776.ece