The success of the PLI is likely to hinge on how entrepreneurs weigh the risk-reward equation

What is the news?

Recently, Cabinet gave approval of a Production Linked Incentive (PLI) scheme for the textile sector that is expressly targeted at the man-made fibre (MMF) and technical textiles segments.

In the global level, there was a shift in the consumer preferences and fashion trends which saw MMF surpass cotton as the fibre of choice in the 1990s. But India’s textile and clothing exports have continued to remain dominated by cotton and other natural fibre-based products.

In last fiscal as well, MMF share remained unchanged. The present scheme, therefore, aims to focus attention towards MMFs.

What is the aim of the scheme?

It aims to specifically focus investment attention on 40 MMF apparel product lines, 14 MMF fabric lines and 10 segments or products of technical textiles. The items have been chosen on account of being among the top-traded lines in the global market, as well as India having less than a 5% share in each of them.

What is the purpose of inclusion of intermediate products?

It reflects the Government’s keenness to ensure the scheme ultimately delivers on the broader policy objectives.

How the incentives will be categorized?

The incentives have been categorized into two investment levels.

Firms investing at least ₹300 crore into plant and machinery over two years for making a specified product would need to hit a minimum turnover of ₹600 crore before becoming eligible to receive the incentive over a five-year period.

At a second level, an investment of ₹100 crore with a pre-set minimum turnover of ₹200 crore would enable qualification for the incentive.

Source: This post is based on the article “The success of the PLI is likely to hinge on how entrepreneurs weigh the risk-reward equation” published in The Hindu on 10th September 2021.