Will mega textile parks help boost the sector? (GS Paper 3, Economy)
Why in news?
- Recently, the government announced that seven mega textile parks under the ₹4,445-crore PM Mega Integrated Textile Regions and Apparel (PM MITRA) scheme will be set up in the first phase. The notification for large-scale textile parks under PM MITRA had been given in October 2021.
- The scheme which seeks to streamline the textile value chain into one ecosystem, taking in spinning, weaving and dyeing to printing and garment manufacturing, is expected to generate investments worth ₹70,000 crore.
- It would also lead to the creation of 20 lakh jobs.
What is expected in the first phase?
- Under the first phase of the PM MITRA scheme, large textile parks, spread across at least 1,000 acres, will come up in seven States; Tamil Nadu, Karnataka, Telangana, Madhya Pradesh, Maharashtra, Gujarat, and Uttar Pradesh, housing the entire textile value chain, from fibre to fabric to garments.
- The parks will have plug-and-play manufacturing facilities and all the common amenities required.
- The Central government’s budget outlay for the scheme, which is ₹4,445 crore, is to be spent till 2027-28.
- Special purpose vehicles, with a 51% equity shareholding of the State government and 49% of the Centre, will be formed for each park. The State governments will provide the land, be part of the SPV, and give the required clearances.
- The Central government will disburse Development Capital Fund of ₹500 crore in two tranches for each of the seven facilities. This is for the creation of core and support infrastructure.
- It will also give a Competitive Incentive Support of ₹300 crore per park to be provided to the manufacturing units.
Is it different from previous textile schemes?
- The textile and apparel sector has benefited from different programmes, such as the Apparel Park Scheme announced in 2002 and the Scheme for Integrated Textile Parks launched in 2005, which supported development of common infrastructure.
- The PM MITRA scheme is envisaged to be a unique initiative and the differentiating factors are the emphasis on large-scale production and provision of plug-and-play manufacturing centres. The scheme is to be implemented jointly by the Central and State governments.
- The parks, which will be open for foreign direct investments, will be located in States that have inherent strengths in the textile sector.
- Each park will have effluent treatment plants, accommodation for workers, skill training centres and warehouses too. It is designed to attract investment from companies that are looking to scale up, and require integrated manufacturing facilities in one location.
What will be the impact on MSMEs?
- The micro, small and medium enterprises (MSME) sector is said to control almost 80% of the textiles and apparels currently made in India. Further, the Indian textile and clothing units are more cotton-based.
- The industry has mixed views on the immediate impact of the huge investments that are expected to come into the parks in existing units.
- However, with mounting challenges such as the global geopolitical situation, and overseas buyers exploring China as well as other sourcing options, the past two years have seen notable shifts in supply chains.
- Orders are transitioning to suppliers who are highly price competitive and have sustainable production processes. Even those who cater to low-volume orders are going in for value addition for better price realisation. Thus, manufacturers with vertically integrated facilities are at an advantage compared to smaller, standalone players.
- The MSME exporters are also realising that there is a need for integrated, larger facilities and these factors are expected to drive the industry’s investment plans.
Does the industry expect a boost in exports?
- Indian textile and clothing exports have stagnated at around the $40-billion mark over the past four years, and stood at $44 billion last year; the aim is to achieve $100 billion in exports and target a domestic business of $250 billion by 2030.
- The PM MITRA parks aim to augment the export potential of the sector. Cotton-based products make up approximately 65% of the total textile and apparel exports.
- Indian exports, which cover a gamut of products, are mainly known for yarn, bedsheets and towels, T-shirts and denim fabric. Expanding the fibre and product line will give India a larger share in the global market, from the current 5%.
- In order to make a giant leap in exports and domestic sales, the industry has to also be price competitive right from the raw material stage and gear up to meet the sustainability and traceability demands of international buyers.
- The State governments and developers should give thrust to the PM MITRA parks for sustainable and cost-effective solutions for pollution control and other issues that the value-adding segments of the textile chain face. India can take a cue from countries such as Turkey where integrated textile parks are highly efficient.
Way Forward:
- Some of the MSME players who have the appetite to invest but are in need of resources are hoping the government will combine the Production Linked Incentive scheme II with PM MITRA, though guidelines issued in January last year say incentives under PM MITRA will be available only to those companies that have not availed of benefits from the PLI scheme.
- The Central and State governments have to encourage MSME units to invest in the PM MITRA parks and scale up, say insiders.
- Else, India faces the risk of missing out on the opportunity to become the prime destination for textile production and exports.
