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Explained | Why has the govt announced a PLI scheme for synthetic fibres, technical textiles?

Most Production-Linked Incentive (PLI) schemes until now have been targeted at high-value goods or those that would cut import dependence. Synthetic fibres, which include rayon, nylon, polyester and acrylic, and technical textiles don’t come under either category. Moneycontrol takes a look at why the government is focused on these products.

September 08, 2021 / 06:12 PM IST
Representational Image.

Representational Image.

On Wednesday, 8 September, the Cabinet approved a new five-year Production Linked Incentive (PLI) scheme specifically for synthetic fibers and technical textiles, which are used in healthcare, personal protection as well as for industrial safety.

Along the lines of existing schemes, the latest PLI plan is aimed at providing a major boost to domestic production and exports of these items. Interestingly, the Rs. 10,683 crore scheme is geared towards items which account for less than 20 percent of India's total textile production.

What are synthetic, or man-made, fibers ? 

In fashion, a fiber is a long and thin strand or thread of material that can be knit or woven into a fabric. Man-made fibers (MMFs) are made by chemical synthesis, as opposed to natural fibers that are directly derived from living organisms. MMFs such as nylon, polyester, acrylic, rayon and polyolefin dominate global apparel production. They account for 75 percent of all fibers produced worldwide, and for 80 percent in developed markets such as Europe and North America.

World production was 76.5 million tonnes in 2019 with the principal end-use being in clothing, but also extended to carpets and household textiles. They are also used in a wide range of technical products such as tyres, conveyor belts, cold-weather clothing, air and water filters.

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What are technical textiles ?

Technical textiles are a segment of textiles used for a vast array of purposes such as healthcare, agriculture, roads, railway tracks, military and disaster management. In India, the technical textiles segment is estimated at $16 billion or 6 percent of the $250-billion global market.

According to the government, the penetration level of technical textiles is low in India, varying between 5 and 10 per cent against 30-70 percent in developed countries.

As many as 92 categories of technical textiles, including fire-resistant curtains, geogrid for railways, high-altitude combat gear, bulletproof jackets, leno bags for transporting farm commodities, and architectural membranes for tents, had been identified for mandatory use by central ministries and public agencies.

Last year, the Cabinet approved a Rs 1,480-crore National Technical Textiles Mission set to run till 2024. The mission targets an average growth rate of 15-20 percent annually and a domestic market size of $ 40-50 billion by 2024.

What is the state of textile production in India ?

In terms of employment, the textiles (including apparel) industry in India is only behind the agricultural sector. It provides direct employment to 45 million people and 60 million in allied industries, according to Invest India, the government’s investment promotion arm.

India is among the world’s largest producers of textiles products and apparel. The domestic textiles and apparel industry contributes 5 percent of India’s GDP, 7 percent of industry output in value terms and 11 percent of  export earnings.

While there are almost a dozen incentive schemes for manufacturing, myriad issues ranging from a lack of working capital and outdated technology to the fragmented nature of supply chains have held it back. To double the industry size to $190 billion by 2025-26, seven mega textile parks have been planned.

How are India's textile exports faring ?

Textiles have historically been one of the largest foreign exchange earners for India, but their share of exports has fallen from 24 percent in 2000 to just 11 percent in 2020. This happened as Indian companies and exporters have continuously lost market share to more aggressive rivals from China, Bangladesh and Thailand.

The hit has been excruciatingly severe in the biggest sub-segment of India's textile, apparel, which fell from contributing 11 percent of exports in 2000 to just 4 percent in 2020. The pandemic has hastened this decline, sending policymakers into a huddle on damage control measures.

Textile and apparel exports from India declined by 10 per cent  to $32.05 billion during the fiscal year 2020-21 ending March 31. While this was in line with other major sectors, the share of textiles and made-ups (bed linen, carpets, bean bags and so on) increased to 62 per cent of total exports while shipments of apparel decreased to 38 per cent during the year.

Why is the government batting for a PLI scheme for a relatively small segment within textiles ?

Officials say the primary reason is to finally cause a shift from traditional textiles to newer, more globally sought-after products. Most apparel manufacturing is increasingly becoming dependent on MMFs. The new scheme is expected to help India quickly catch up with competing economies by switching to products and production methods more conducive to consumer tastes and corporate demand.

The share of MMFs in India's traditional textile export basket remains low with only a fifth of all textile products made of synthetic fiber and  the rest cotton. Interestingly, the globally the trend is the opposite.

How does the scheme work ?

The scheme is expected to cover around 40 MMF apparel product categories such as track suits, coats and baby garments, and around 10 in the technical textiles category. An incentive of 3 percent to 11 percent of the annual incremental revenue for five years will be provided to existing as well as proposed investments in the sector.
Subhayan Chakraborty has been regularly reporting on international trade, diplomacy and foreign policy, for the past 6 years. He has also extensively covered evolving industry and government issues. He was earlier with Business Standard newspaper.

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