Recently Government of India promulgated Production linked Incentive scheme for various sectors to increase innovation and productivity and support Make in India initiative. In the chain of the said schemes, a new scheme is notified for Textile sector, vide Notified vide Notification No. 12015/03/2020-IT dated 24.09.2021 and published on 27.09.2021 in the Gazette of India, with the objective to promote production of MMF Apparel & Fabrics and Technical Textiles products in the country to enable textile industry to achieve size and scale; to become globally competitive and a creator of employment opportunities for people. The scheme is to support creation of a viable enterprise and competitive textile industry.
PARADIGM SHIFT IN METHOD OF INCENTIVE
Almost all the incentive schemes implemented by the Central and State Governments till date were either capital investment based, interest rebates/ reimbursements or recently GST reimbursements. However these new chain of scheme implemented are production linked, thus ensuring that there is a sustained capacity creation along with actual utilization of the capacity thereby confirming the creation of employment and entrepreneurship. Achievement of pre-defined stages of production is essence to claim the incentives under these set of schemes.
WHAT IS MMF AND TECHNICAL TEXTILES
Man-made fibres (MMF) are mainly of two types viz. synthetic and cellulosic. Synthetic fibres are produced from crude oil and cellulosic fibres are from wood pulp. The main varieties of synthetic staple fibres are polyester. Acrylic and polypropylene. Cellulosic fibre is viscose fibre, modal, etc. Textiles made out of these synthetic and cellulosic fibres are called man-made fibre textiles. India is second largest manufacturer of MMF (Polyster and Viscose)
Technical textiles are defined as textile materials and products manufactured primarily for their technical performance and functional properties rather than aesthetic and decorative characteristics like bullet proof jackets, parachute fabrics, non woven wipes etc.
APPLICATION PROCEDURE
Eligible Persons
Any person can apply for the scheme including a company/firm/LLP/trust incorporated in India and interested in operating under the Scheme. The Applicant once selected under the scheme shall be required to form a new/separate company under Companies Act, 2013, and the new entity will be known as Participant.
Eligible Products
Specifically for following products:
1. Man Made Fiber (MMF) apparel and Fabrics
2. Technical textiles
The list of products is also included in the G.R. (File No. 12015/03/2020-IT- 28/ 12/2021) and the list is HSN based.
Time schedule for Application for selection procedure
Opening of PLI application window is 01.01.2022 and application can be file upto 31.01.2022 but ministry of textile through press release dated 27th Jan, 2022 has further extended the time line for application till 14.02.2022.
https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1793181
Application fee:
A non refundable application fee of Rs.50,000/- has to be paid while applying for the scheme.
Proposed Annual investment plan, expected sales turnover and expected employment generation must be informed in the application. Proposed locations of set up of units under the scheme has also to be declared. There are area wise restrictions regarding change of locations in future.
Application has to be made on http://pli.texmin.gov.in
WHAT IS THE SCHEME
Approved Units will be provided cash incentives as a percentage of turnover and incremental turnover achieved over a period of five years. The Scheme is in operation from 24.09.2021 (Date of Notification) to 31st March 2030 and the incentive under the Scheme will be payable for a period of 5 years only)
The scheme is divided into two categories:
1. Applications with minimum projected investment of Rs.300 cr.
2. Applications with minimum projected investment of Rs.100 cr.
This investment will be calculated excluding land and administrative building cost.
CONDITIONS TO BE FULFILLED
A new company will have to be formed for implementing the investment. First two years will be considered as gestation period (i.e. FY: 2022-23 to FY: 2023-
24 will be the gestation period) for both the categories the scheme envisages a minimum turnover of twice the investment i.e. Rs.600 cr for Rs.300 cr category and Rs.200 cr for Rs.100 cr category after the gestation period.
After that there should be a minimum increment of 25% in the turnover over earlier year to be eligible for incentive. Maximum investment increment to be eligible for incentive is 353.
Investment target can be achieved till gestation period is over or in the first performance year. But target turnover has to be achieved form the first performance year (1st Performance year is FY 2024-2025; 2nd is 2025-2026; 3rd is 2026-2027, 4th is 2027-2028; and 5th is 2028-2029).
There should minimum value addition done, as prescribed, in the owned factory premises. For the purpose of this Scheme, minimum value addition means 60% value addition in India for integrated or fibre/yarn to fabric or fabric to garment; and technical textiles. However, for independent fabrics processing industry (dyeing and printing etc.) the required minimum value addition is 30% ln Trading and Job work turnovers will not be accounted for. Turnover has to be made from own raw material to finished product manufacturing activity.
Value-Addition formula:
VA =(A-B) / B × 100
A= Products sale value declared in GST Invoice excluding GST
B= Purchase value of Inputs/raw materials excluding Duties/Tax/Cess
Turnover of only registered product will be eligible for incentive and turnover calculation.
CALCULATION OF INCENTIVE
Net Incremental Sales within cap of notified Product(s) excluding taxes x Rate of Incentive in percentage for the Performance Year.
Prescribed Turnover and Rate of incentive
| Year | Ge-station Period | Performance year | Incentives claim year | Scheme Part 1 | Scheme Part 2 | ||
| * | FY 2022-
2023 |
Minimum Pre-scribed Turnover | Rate of incentive | Minimum Pre scribed Turnover | Rate of incentive | ||
| * | FY 2023-
2024 |
Optional* | Optional* | ||||
| 1 | Year 1 | FY 2024-
2025 |
FY 2025-
2026 |
600 Cr | 15% | 200 Cr | 11% |
| 2 | Year 2 | FY 2025-
2026 |
FY 2026-
2027 |
750 Cr | 14% | 250 Cr | 10% |
| 3 | Year 3 | FY 2026-
2027 |
FY 2027-
2028 |
937.5 Cr | 13% | 312.5 Cr | 9% |
| 4 | Year 4 | FY 2027-
2028 |
FY 2028-
2029 |
1171.87
Cr |
12% | 390.63 Cr | 8% |
| 5 | Year 5 | FY 2028-
2029 |
FY 2029-2030 | 1464.84
Cr |
11% | 488.2 Cr | 7% |
SUMMARY
The Scheme looks promising for development of thrust areas of textiles. It is targeted at incentivizing the large capital intensive projects in the textile industry so as to increase competence and promote the Make in India objective of the Government. However the challenge of achieve turnover twice of the project cost is not easy and the industry will have to work hard to reach the same in the given two years’ gestation period.
With Contributions from Assitant Mr Himanshu Hareet
*****
Disclaimer : While every care has been taken to ensure the accuracy/ authenticity of the above, the readers are advised to recheck/ reconfirm the same from the original sources/ relevant departments. The company shall in no way be responsible for any loss or damage suffered to any person on account of the same. The views expressed are personal opinion, compilation and is no way, to be used for any legal opinion, matters
Author Bio
