New textiles minister Piyush Goyal will quickly assessment a proposed Rs 10,683-crore production-linked incentive (PLI) scheme for merchandise made of artificial fibre and technical textiles, amid clamour for decreasing the lofty turnover and funding targets for firms to avail of advantages, sources instructed FE.
Goyal, who can be the commerce and business minister, faces a tricky process, because the labour-intensive garment sector, comprising primarily MSMEs and dominated by cotton-based gamers, additionally desires the inclusion of value-added cotton merchandise within the scheme to learn a lot of companies.
But the calls for go in opposition to the federal government’s intent of luring primarily giant firms to create few champions in key sectors by numerous PLI schemes. In textiles and clothes, it additionally seeks to appropriate India’s historic coverage bias in the direction of cotton-based worth chain that’s, in reality, opposite to the worldwide consumption sample. The concept is to reclaim India’s export markets after ceding substantial floor to Bangladesh and Vietnam lately. Goyal took over because the textiles minister on July 8, taking up from Smriti Irani.
In its draft PLI scheme floated earlier, the textile ministry proposed incentives within the vary of 7-11% within the first 12 months. But solely these companies with annual turnover of at the very least Rs 100 crore had been to make the minimize. The advantages in all classes had been proposed be lowered by 100 foundation factors every year after the primary 12 months and granted for a complete of 5 years from FY22. “It’s a very important scheme, as it has potential to create a huge number of jobs. So, obviously, the minister’s guidance will be sought and he will review it,” stated an official supply.
The draft pledged as a lot as 11% incentive to giant firms for investments over Rs 500 crore in greenfield initiatives in technical textiles. The profit, nevertheless, was linked to an incremental turnover of Rs 1,500 crore within the first 12 months and a 25% rise in turnover every year after that.
It additionally urged that companies with an annual turnover of Rs 100-500 crore might be eligible for an incentive of 9% for brownfield initiatives. This might be topic to a rise in turnover by 50% every year.
Similarly, firms with a turnover of Rs 500 crore or extra had been to be granted a 7% incentive within the first 12 months. The profit was tied to the situation that turnover needs to be raised by 50% within the first 12 months and by 25% every year after that.
The incentives had been proposed to be prolonged for incremental manufacturing in 50 laggard classes (40 man-made-fibre-based clothes and 10 technical textiles).
Interestingly, some gamers, who’re struggling to deal with a Covid-induced liquidity squeeze, need the rollout of the scheme to be deferred in order that they’ll benefit from it.
Raja M Shanmugham, president of the Tirupur Exporters’ Association, the nation’s largest garment cluster, hailed the PLI scheme. However, he stated, for the massive variety of MSMEs to reap the advantages of the PLI scheme, the factors must be relaxed and cotton merchandise that see substantial worth addition must be introduced beneath its ambit. More importantly, the necessity of the hour is to stop the companies from sinking into oblivion by facilitating higher and simpler credit score at reasonably priced charges, he added. “Unless the MSMEs survive this crisis, how will they be able to gain from the scheme and contribute to exports?” he requested.
According to famous textiles professional DK Nair, the scheme appears well-intentioned, however the targets, particularly for incremental turnover, might be arduous to satisfy. Moreover, assessing incremental turnover of firms, particularly the unlisted ones, might be a herculean process, given the scope for manipulation between group companies, Nair added.
Even earlier than the pandemic struck, textile and garment exports shrank 8.6% year-on- 12 months to $33.7 billion in FY20. As such, the sector’s share within the total merchandise exports has been sliding persistently lately, having dropped from as a lot as 13.7% in FY16 to only 10.8% in FY20, the bottom in round a decade. Last fiscal, such exports dropped by 10% to $30.three billion, worse than a 7% contraction in total merchandise exports.
Globally, whereas China stays probably the most dominant participant and leads by an enormous margin in each textiles and clothes, India has been overwhelmed by each Bangladesh and Vietnam lately in attire exports.