Textile Ministry proposes grading system to select entities for PLI benefits

Amiti Sen New Delhi | Updated on October 18, 2021

The draft guidelines suggest a point-based system with criteria including employment generation, location, financial and technological soundness

The Textile Ministry has proposed a grading system to select entities for the ₹10,683 crore Production Linked Incentive scheme for man-made fibre (MMF) and technical textiles sectors giving preference to manufacturers who generate higher employment, locate in smaller cities, are financially sound, have relevant experience & technical capacity and are ready to invest in integrated production rather than in single segment.

In the draft guidelines for the scheme, that will be formalised after comments are received from all stakeholders, the Ministry has also assured that in case minimum threshold of turnover for incentive is not achieved in a particular year by participants, they will lose out on incentives in that particular year but will not be restricted from claiming incentive in the subsequent years, if they meet the eligibility criteria.

“The PLI scheme for the technical textiles and MMF (man made fibre) segment has been notified but the guidelines are important, as they map out all the nuts and bolts of the scheme that the industry needs to be aware of before applying. The grading system can play a crucial role in case the number of applicants is more than the allocated sum,” a person tracking the matter told BusinessLine.

The Union Cabinet had cleared the much-awaited PLI scheme for the textile industry last month to promote the production of high-value MMF fabrics, garments, and technical textiles. The government hopes it will lead to fresh investment of more than ₹19,000 crore, a cumulative turnover of over ₹3 lakh crore, additional direct employment of 7.5 lakh and indirect employment of several lakhs more.

Grading system

Under the grading system, a maximum of 80 points can be scored by an aspirant. An applicant can score as much as 15 points for providing jobs to over 10,000 persons while points for employing 500-5,000 workers and between 5,000-10,000 workers is 5 and 10 respectively.

A business can score up to 10 points for both sound finances and relevant experience & technical capacity. Investing in ‘aspirational districts’ and Group C towns as designated by Housing Ministry can fetch up to 15 points. Single segment investment can earn an applicant 5 points whereas investing in integrated weaving and processing or fabrics and garmenting can double those points to 10.

“The idea is to promote those investments that generate the maximum employment and create economic activity in smaller towns while being financially and technologically sound,” the official explained. The selection committee will be chaired by Secretary Textiles and will have representatives from Niti Aayog and the DPIIT.

The Centre also wants to build in some flexibilities into the scheme to ensure that economies of scale don’t get lost. For instance, the plant, machinery and equipment of the project approved under the scheme can also be used for producing goods not notified under the scheme. Use of associated utilities is also permitted for an existing manufacturer, in case new investments are made. However, investment already made shall not be counted under the scheme.

Participant company can set up more than one unit for production of notified products provided they declare this along with their applications, per the draft guidelines.

The PLI scheme for textiles is part of the overall announcement of PLI schemes for 13 sectors made earlier during the Union Budget 2021-22, with an outlay of ₹1.97 lakh crore. Any entity willing to invest a minimum of ₹300 crore in plant, machinery, equipment and civil works (excluding land and administrative building cost) shall be eligible to apply for participation in first part of the scheme. The successful candidates will earn an incentive of 15 per cent of turnover the first year and thereafter, one per cent lower every year for the next four years provided incremental turnover is reached.

In the second part, the minimum investment limit is lower at ₹100 crore, while incentives, too, are lower, starting at 11 per cent in the first year.

Published on October 18, 2021

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