6 minute read 12 Apr 2021
An analysis of the PLI scheme for the textile industry

How PLI will help the Indian man-made fibres and technical textiles sector

By Sagar Shah

EY India Indirect Tax Partner

Sagar focuses on textiles, chemicals, auto and Real Estate sectors and looks after the firm’s Pune and Gujarat practice. He is an avid reader, and loves trekking and traveling.

6 minute read 12 Apr 2021

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With the help of production-linked incentive scheme (PLI), the Indian textiles sector can become a global champion in products such as man-made fibres and apparels.

The Indian textiles and apparel industry is said to be one of the largest in the world, and is a key contributor to the country's export basket, bringing in about 12% of export earnings1. Textiles and apparels sectors are also the second largest employment generator, next to agriculture sector, helping provide over 100 million direct and indirect jobs.

This is a thrust sector for the country and a proper push in the right direction will enable further growth in the sector, especially in products where the country is still largely dependent upon imports.

The budgeted outlay under the PLI policy for textiles sector covering man-made fibres (MMF) and technical textile is proposed at INR 10,683 crore. The scheme will be implemented by the Ministry of Textiles (MoT) and is expected to be made effective shortly.

PLI scheme will attract additional investment by existing companies in the MMF and technical textile sectors and bring in new investments by Indian and multinational companies in this segment. This is an indication that the government’s focus is only on this sub-sector out of the entire textiles sector, which is still dependent heavily on imports.

This means that garments made of synthetic fibres would be eligible under the scheme as against natural fibres like cotton, which are excluded.

Scheme objective

The main objective of the scheme is to enhance India’s manufacturing capabilities by increasing investment and production in the textile sector, especially in the MMF segment and technical textiles under greenfield and brownfield investments. This is so that there are more competencies built in India for these products which are hitherto not manufactured to the potential scale.

Another objective is to create a few large world-class global champion companies in MMF and technical textile segments, which have the potential to grow, both in size and scale, using cutting-edge technology and thereby penetrating global value chains.

Possible product category

It is expected that PLI scheme may cover approximately 40 product categories under MMF and about 10 in the technical textile segment.

The MMF category largely covers garments covered in Chapter 61 and 62 of the Customs Tariff Act like jerseys, pullovers, trousers and shirts of man-made fibres. The technical textile category may cover products like diapers, adhesive dressings, bandages and safety airbags, as covered under some specific Harmonized System of Nomenclature (HSNs) under chapter 30, 39 or 59 of the Customs Tariff Act.

The reason behind including the aforesaid product categories is that India’s share in exports of these products is less in the global market. Further, India is lagging in the MMF textile trade due to high raw material cost, high tariff barriers and cheap imports from neighboring countries.

Eligibility and incentives

It seems that the incentives would be provided to both greenfield and brownfield investments under this scheme and this would be in the range of 3% to 11% of the incremental revenues’ year-on-year for five years. The interesting point to be seen is what would be the ceiling set for the year on the year increase which is currently being discussed to be set at a high number of about 50%.

There could also be a cap on the maximum amount that can be claimed under the PLI scheme by an eligible company to have an even distribution across sectors.

As soon as the Union Cabinet approves the PLI scheme for the textiles sector, which is in the last stages of discussion and finalization, it will be notified by the MoT and guidelines will also be issued along with modules where eligible and interested companies can get themselves registered.

It is expected that the scheme will be notified by April 2021. Typically, there would be a window of 120 days to apply for the scheme (as in case of other schemes).

Ask from the industry basis the current design of the scheme:

While the scheme would boost certain players looking to expand in the MMF and technical textile category, the following is the industry’s ask to make the scheme more effective:

  1. Expansion of list of products: The list of products currently being mentioned needs to be revised. One of the major reasons given is that the current list doesn’t cover synthetic fabrics, which is major input for garments and if the fabric itself continues to be imported the larger benefit would not be achieved by the industry. Hence it is a suggestion that fabrics like viscose, polyester and nylon should also be covered. The other major ask of the industry is to cover non-woven fabrics and yarn used for the technical textiles to make the scheme more holistic and enable more investments in this category as well.
  2. Reducing the investment limit for new greenfield investments:  As compared to many other sectors, the textile sector in India is more fragmented in the sense that there are hardly any companies which do end-to-end manufacturing for garments unlike that in countries like China. Each process in manufacturing of a garment is being done by multiple players, and for every process there are multiple layers. Also, the industry is more labor intensive and hence to achieve the real benefit of the policy, the investment limit should be kept to the minimum.
  3. Special allocation to MSME sector: Considering the fact that the textile sector is largely driven by the MSME sector, whether in Surat or in Tripura or elsewhere, it is imperative that the scheme enables some of these medium scale units to become large scale units by providing a policy boost.
  4. Reduce the incremental turnover criteria of 50% year-on-year: From the available information from various sources, it is expected that the as per the eligibility criteria of the upcoming PLI scheme, the incentives would be linked to incremental turnover criteria of 50% year-on-year with base year being FY 2019-20, i.e., every year the turnover should increase by 50% and for up to five years from the base year. This is far more than what is envisaged for any other sector. The recommendation is to cap this to say about 150% CAGR over a period of five years.
Way forward

While the government is discussing various representatives from the industry in all earnest to make the scheme successful, it would be interesting to look at the products and the eligibility criteria which gets notified in the final scheme.

Undoubtedly, the scheme will have some of the large players consider building value chains across the entire spectrum of garment manufacturing and build large scale production, which clearly is the intent of the government to create global champions having huge capacities. This would also probably bring in a new era of integrated manufacturing as compared to the current design of the industry in India.


The PLI scheme is likely to benefit the entire value chain of the textiles sector directly and indirectly and may enhance India’s manufacturing capabilities and exports, thereby boosting the Atmanirbhar Bharat Abhiyan.

About this article

By Sagar Shah

EY India Indirect Tax Partner

Sagar focuses on textiles, chemicals, auto and Real Estate sectors and looks after the firm’s Pune and Gujarat practice. He is an avid reader, and loves trekking and traveling.