Introduction
The Indian textile and apparel industry is largely cotton dominated, while the global demand is steadily shifting towards man-made fibres due to value-for-money and functionality aspects. Another reason for shift is that natural fibers like cotton are not able to meet the growing demand creating a gap that is being fulfilled by manmade options.
In order to provide a boost to the indigenous manufacturing of MMF textiles and technical textiles, the Government of India launched the Production Linked Incentive (PLI) Scheme with a budget outlay of ₹10,683 crore. The scheme will offer direct incentives on turnover generation for notified garments, fabric, and technical textile categories. There are two brackets of investments defined under the Scheme:
Part 1:Rs. 300 crore investment with a minimum turnover target of 600 crores.
Part 2: Rs. 100 crore investment with a turnover target of 200 crores
Under the Scheme 64 applications have been approved.
Quantum of Incentives under PLI
Part 1 (Investment of Rs. 300 crores):
Let us consider an investment in a 39 TPD knit fabric and 500 sewing machine setup where the investment would work out to be approx. Rs. 400 crores. Total sales generated in 7 years (including 2 years as gestation period) will be around Rs. 1,465 crores for which the total incentive that can be claimed will be approx. Rs. 196 crores.
From the above calculation, it can be seen that under Part 1 of the Scheme, incentives up to 20% of the investment can be claimed. Additional investment will be required in subsequent years to meet the 25% year-on-year turnover growth criteria.
Part 2 (Investment of Rs. 100 crores):
Let us consider an investment in an 11 TPD knit fabric and 500 sewing machine setups where the investment would work out to be approx. Rs 140 crore. Total sales generated in 7 years (including 2 years as gestation period) will be around 513 crores for which the total incentive that can be claimed will be approx. Rs. 48 crores.
From the above calculation, it can be seen that under Part 1 of the Scheme, incentives up to 14% of the investment can be claimed. Additional investment will be required in subsequent years to meet the 25% year-on-year turnover growth criteria.
Future MMF market
Currently, polyester accounts for more than 55% of the total fibre consumption in the world. Polyester fibre consumption is expected to grow by another 22 million tons to reach a level of 78 million tons annually and will form a share of 60% of global fibre consumption of 130 million tons by 2025.
In 2019, the global trade of Polyester fabric stood at US$ 49 billion and that of Polyester apparel stood at US$ 74 billion. Polyester Fabric has been growing at a CAGR of 6% since 2010, Polyester Apparel has been growing at a CAGR of 7% While, technical textiles have been growing at a CAGR of 3.5%.
The growth in MMF consumption is driven by growth in consumption of finished categories like sportswear, technical textiles and women’s wear. India has a strong presence of manmade fibres & filaments in the country. It is suitably placed to leverage this advantage and capture the growing demand for MMF-based textiles.
Conclusion
The scope for the Indian textile industry in the rapidly growing global MMF market is huge. Realizing the need to be proactive and take measures that help enhance India’s existing global trade share, Govt. has taken one such step in the right direction by launching PLI Scheme. The Scheme provides a great opportunity for the investors and the investors have also given a good response as evident from large number of applications.
The government is in the process of formulating a 2.0 version of the PLI scheme and an investor should look in to avail of benefits under the same. The minimum investment criteria of Rs 100-300 crore could see a downward tweak in PLI 2.0 for the textiles sector allowing smaller projects to be covered as well.