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SIDBI Schemes – Full Form, Functions, and Loan Application Steps

admin — Tue, 11 Jul 2023 09:13:00 +0000

Micro, small, and medium enterprises (MSMEs play a crucial role in the Indian economy. They contribute significantly to employment generation, innovation, and overall economic growth. However, they often face numerous challenges that hinder their sustainability and growth.
Access to funds continues to be a significant challenge for small businesses in the country. A survey by the Ministry of Micro, Small and Medium Enterprises (M/o MSME) revealed that about 56% of MSMEs lack access to formal credit. Limited financial resources make it difficult for these enterprises to invest in technology upgradation, research and development, and market expansion.
Another significant challenge is the lack of skilled workforce. Many MSMEs struggle to attract and retain skilled employees due to competition from larger companies and inadequate training facilities. This affects their productivity and efficiency.
Infrastructure deficiencies also pose challenges for small companies. Furthermore, inadequate transportation facilities, power shortages, and limited access to industrial parks or specialised zones impede their operations and increase costs. SIDBI came into existence to address these challenges and is playing a pivotal role in the economy.

What is SIDBI?

Small Industries Development Bank of India, the full form of SIDBI, is the principal financial institution for developing, promoting, and financing the country’s MSME sector. The government established the bank on April 2 1990 as a wholly-owned subsidiary of Industrial Development Bank of India. SIDBI delinked from IDBI on March 27 2000 and has headquarters in Lucknow and offices all over the country.

SIDBI’s mission is to facilitate and strengthen credit flow to firms as well as address financial and developmental gaps in the MSME ecosystem. One of the key objectives of SIDBI is to establish itself as a unified platform that addresses the developmental and economic requirements of the MSME sector, aiming to strengthen it, foster vitality, and enhance its global competitiveness.

To date, the bank has supported more than 450 lakh enterprises, created more than 1,200 lakh jobs, and contributed more than 7% to the country’s GDP.

SIDBI Functions and Objectives

The bank performs various functions to fulfil its mission. These include:

Promotion and Development: SIDBI promotes and develops the MSME sector by providing non-financial assistance. These include technology upgradation and marketing support, as well as the development of skills, enterprises, and clusters. It also undertakes research and advocacy activities to create a conducive policy environment for MSMEs.
Venture Capital Funds: The bank supports entrepreneurship and innovation by investing in venture capital funds. These funds finance emerging startups in various sectors. It also manages certain government schemes that provide equity support to startups.
Direct Financing: SIDBI directly finances MSMEs by offering innovative and customised lending products. These products address the specific needs and gaps of MSMEs. Some of the direct finance products provided include service sector financing, receivables support, risk capital, and sustainable funding.
Indirect Financing: The bank provides indirect financing to MSMEs by offering refinancing for banks, financial institutions, microfinance institutions, and fintechs that lend to MSMEs. This helps to increase the availability and affordability of credit for MSMEs.
Facilitation: Another SIDBI function involves facilitating the MSME sector by coordinating with various stakeholders such as government ministries, regulators, industry associations, academic institutions, and other financial institutions. The bank also serves as a nodal or implementing agency for various government schemes that benefit MSMEs.
Green Environment: SIDBI aims to support national plans on climate change. The bank contributes to mitigating greenhouse gas emissions and adaptation to climate change impacts by promoting projects based on renewable energy, green financing, waste management, and resource efficiency among MSMEs. It also implements various schemes and projects under the National Action Plan on Climate Change.

SIDBI Schemes Involving Direct Financing

Under direct financing, the bank offers the following 15 schemes:

1. Express 2.0

This SIDBI scheme aims to offer a swift approval process through an automated platform for MSMEs seeking term loans. It is exclusively for new customers in the manufacturing and service sectors that wish to acquire machinery or equipment. The loan amount is up to Rs. 1 crore, and the tenure is up to five years. The interest rate links to the Marginal Cost of Funds Based Lending Rate (MCLR).

Eligibility Criteria:

You must possess Udyam and GST registrations.
Your business must have a minimum operational history of three years.

2. SAATH

SAATH stands for SIDBI Assistance & Aid for Thematic Support to MSMEs promoted by SC/STs. This scheme offers loan assistance on relatively softer terms for establishing new or greenfield units, or expanding or modernising existing units. The loan amount ranges from Rs. 25 lakhs to Rs. 300 lakhs. Under this scheme, SIDBI bears 50% of the credit guarantee fees. In addition, SAATH has nil prepayment charges and is well-known for quick disbursement.

Eligibility Criteria:

The promoters of the firm must belong to the SC/ST category and must possess a minimum stake of 51% in the company.
The applying firm should not have any default record with banks and financial institutions.
The company must be registered under the provisions of the MSME Act.

3. ARJANA

This SIDBI scheme is for MSMEs operating in the service and manufacturing sectors with women entrepreneurs. This loan’s minimum and maximum disbursement rates are Rs. 25 lakhs and Rs. 300 lakhs respectively.

Eligibility Criteria:

Business registration must be as per the MSME Act.
The woman entrepreneur should have a 51% stake at minimum in the company.
The company must clear a due diligence check conducted by Credit Information Bureau India Limited (CIBIL).
The company must not have any default record with banks and financial institutions.

4. STEP

STEP stands for SIDBI Term Loan to Enhance Production of MSMEs. This facility assists in helping a company meet its working capital requirements and ensuring it can easily execute confirmed orders. This scheme is also designed to help augment the net working capital (NWC) of such firms. STEP offers loans of up to Rs. 200 lakhs to new customers and up to Rs. 300 lakhs to existing customers.

STEP is well-known for its quick sanctioning, usually completed within two days, as well as its zero processing fees. The repayment tenure is three years, which includes a six-month moratorium period.

Eligibility Criteria:

New applicants must have been operating their business for at least three years while existing customers must have a minimum operational history of two years.
Micro enterprises applying for the loan must demonstrate a profit in the last two financial years. On the other hand, existing customers should have maintained a profitable business for at least one year.
There must be no records of debt default.

5. Ubharte Sitaare

This SIDBI scheme targets MSMEs that have the potential to become export champions. The sanctioned funds are accessible for land, building, and advanced machinery investments, ultimately facilitating modernisation, capacity upgrades, and diversification. Under this scheme, the maximum funding available is up to 80% of the original project cost, which means you can classify it as need-based funding. The repayment tenure generally lasts up to six years, which is extendable up to 10 years and includes a moratorium of up to two years.

SIDBI offers this loan without requiring a joint partnership with Export-Import Bank of India (India Exim Bank). Some of the sectors eligible under the Ubharte Sitaare scheme are:

Chemicals
Aerospace and defence
Pharmaceuticals
Automobiles
Food processing
Precision engineering
IT and Information Technology Enabled Services (ITES)
Textiles and allied sectors.
Eligibility Criteria:
- For new units, the company’s promoters must have sufficient experience in the relevant industry as well as demonstrate major projected revenue from exports. However, for units co-funded by entrepreneurs from reputed institutions such as IIT, IIM, IISc and NIT, sufficient industry experience is not a requirement.
- For existing units, the scheme requires fundamentally strong export-oriented MSMEs with satisfactory financial performances.
- The company should clear a due diligence check conducted by CIBIL.
- The promoters’ stake in the company needs to be 20%, which increases to 30% for greenfield units.

6. STHAPAN

STHAPAN stands for SIDBI Thematic Assistance for Purchase of Capital Assets in New Enterprises. It offers monetary support to greenfield units to assist them in establishing and expanding new units. The funds are available for investment in land and equipment, as well as the construction of new factory buildings.

STHAPAN provides maximum funding of up to Rs. 2,000 lakhs or 75% of the project cost, whichever is lower. The applicable interest rate for the first year is 2.20%-3.50% and links to the repurchase (repo) rate. Subsequently, the rates adjust based on the internal rating. The repayment tenure is seven years, including a moratorium of up to two years.

Eligibility Criteria:

The MSME should have been in operation for at least five years.
The firm must have a consistent history of generating profits and maintaining stable sales. The promoters’ contribution to the company should be a minimum of 25%.
The company must successfully pass the standard diligence check norms by CIBIL, such as the CIBIL MSME Rank (CMR).

7. ARISE

ARISE, which stands for Assistance to Re-Energize Capital Investments by SMEs, offers two types of facilities: foreign currency and regular-term loans. This SIDBI scheme’s maximum loan amount is Rs. 700 lakhs or 80% of the project, whichever is lower. The applicable interest rate ranges from 1.70%-3.00% plus the repo rate from the first year. From the following year onwards, the internal rating system adjusts the rates. The repayment period for ARISE loans is seven years, which includes a two-year moratorium.

Eligibility Criteria:

The firm must have been operational for at least two years.
The company’s audited financials must display its cash profits.
The contribution from the promoter should be at least 25%.

8. STAR

STAR, which stands for SIDBI Term Loan Assistance for Rooftop Solar PV Plants, assists MSMEs in reducing their electricity bills. The minimum and maximum funding available under this SIDBI scheme is Rs. 10 lakhs and Rs. 350 lakhs respectively. STAR offers attractive features such as 100% financing, direct payment to the supplier, and an interest-bearing fixed deposit of 15%-25% of the loan amount. The repayment term for the STAR scheme is 60 months, which includes a moratorium period of 6-12 months.

Eligibility Criteria:

For new customers, the firm must have a minimum of three years of operational history. However, existing customers only need a minimum of two years of operational history.
The business must demonstrate a profit for at least two years.
The proposed capacity should not exceed the connected load level.
The maximum funding available will be 25% of the company’s net sales.

9. TULIP

TULIP, which stands for Top Up Loan for Immediate Purposes, is a scheme that aims to assist companies in meeting their urgent financial needs. TULIP offers 100% financing, but its availability depends on a 10% fixed deposit (FD) and the extension of this charge. One noteworthy aspect of this product is that it does not require collateral other than the FD. The repayment tenure of this SIDBI scheme is five years, which includes a moratorium of six months.

Eligibility Criteria:

Since this is a top-up loan, at least 1 year of association with SIDBI is necessary.
The loan purpose should relate to the same business line.
The company must demonstrate at least one year of profitability.

10. Speed

SPEED, which is an abbreviation for SIDBI Loan for Purchase of Equipment for Enterprise’s Development, allows new units to purchase machinery from original equipment manufacturers (OEMs) that have signed a memorandum of understanding (MoU) with SIDBI. Existing customers of the bank have the flexibility to make purchases from any OEM.

For new units, the funding assistance provided is 100% of the machinery cost or Rs. 1 crore, whichever amount is lower. On the other hand, existing customers have a higher ceiling of Rs. 2 crores. The repayment tenure for SPEED ranges from two to five years, which includes a moratorium period of up to six months.

Eligibility Criteria:

The company must have been operational for at least three years.
The firm must demonstrate cash profits for the previous two years.

11. Speed Plus

This SIDBI scheme aims to assist MSMEs in purchasing machinery directly from OEMs. The funding assistance for new borrowers is set at 100% loan-to-value of the machinery cost as long as the purchase amount is up to Rs. 2 crores. For existing customers, this amount increases to Rs. 3 crores. However, the actual disbursements may be lower if the applying company has a lower repayment capacity.

The interest rate for Speed Plus depends on the MCLR. The repayment tenure is seven years, including a 6-12 month moratorium.

Eligibility Criteria:

The applying unit must have been in operation for at least five years.
The firm must be able to demonstrate cash profits for the past three years.
The firm’s minimum net sales for the past two years should amount to Rs. 5 crores, without any operating loss.

12. PRATHAM

PRATHAM stands for Priority Assistance to MSMEs Based on Hybrid or Alternate Security Model. MSMEs can choose to opt for this SIDBI scheme to purchase machinery, buy ancillary equipment, and refurbish machines. Additionally, ineligible machines under the Speed Plus and Speed schemes also qualify under the PRATHAM scheme.

The maximum funding available is 10% of the machinery cost or Rs. 300 lakhs, whichever is lower. However, this funding amount depends on 30-40% of the FD provided. The interest rate is MCLR-linked and the repayment tenure is five years, including a moratorium period of 6-12 months.

Eligibility Criteria:

The MSME must have been operational for at least three years.
The firm should have recorded cash or net profits in the previous three years.

13. Working Capital

This SIDBI scheme is exclusively available to MSMEs with an outstanding term loan with the bank or who have submitted a proposal to obtain a term loan. The loan offers firms an immediate cash infusion to support their business operations, enabling them to fulfil their day-to-day expenses.

Eligibility Criteria:

The firm must have a current ratio of 1.25.
The overall asset coverage ratio requirement is set at 1.3 for existing units and 1.4 for new projects.
There should be a minimum interest coverage ratio of 1.5.

14. SMILE

SMILE stands for SIDBI Make in India Soft Loan Fund for Micro, Small and Medium Enterprises. This scheme provides financial assistance to 25 target sectors, enabling them to invest in growth opportunities. These sectors include aviation, construction, railways, pharmaceuticals, textiles and garments, and roads and highways.

Under the SMILE scheme, funds are available in two types; the first is a soft loan, provided in the form of quasi-equity. The second type is a term loan, which is available on relatively soft terms.

The minimum funding available under the soft loan is Rs. 10 lakhs for equipment purchase and Rs. 25 lakhs for other purposes. In contrast, for the term loan, the minimum funding for new customers is Rs. 50 lakhs, while for existing customers, it is Rs. 25 lakhs.

The repayment tenure for the SMILE scheme is 10 years, which includes a 36-month moratorium period. Furthermore, for the soft loan, the interest rate for the first three years ranges from 9.15% to 9.35%, and for term loans, it ranges from 9.45% to 9.95%. However, starting from the fourth year, the interest rate ranges from 11.70% to 12.70%, which can be a floating or fixed rate.

Eligibility Criteria:

The firm must have a minimum promoter contribution of 15% subject to a maximum debt-to-equity ratio (D/E ratio) of 3:1.

15. Partnership with OEMs

This SIDBI scheme serves as a comprehensive solution for MSMEs seeking to purchase plants and machinery directly from OEMs, and is well-known for its simplified credit disbursement process. Typically, the scheme offers loans of up to Rs. 100 lakhs but this amount can increase under special circumstances and specific guidelines from the bank.

The repayment tenure for such loans extends up to 60 months, including the moratorium period. The interest rate applied to the funding follows the guidelines of the SIDBI SMILE scheme.

Eligibility Criteria:

The firm must have been in operation for at least three years.
The company must have satisfactory financial statements.

SIDBI Schemes Involving Indirect Financing

Under indirect financing, the bank offers the following schemes:

1. Refinance Scheme for Micro and Small Enterprises (RMSE XII)

This SIDBI scheme provides refinance assistance to prime lending institutions (PLIs) for lending to micro and small enterprises (MSEs) at a rate linked to the 10-year Indian government bond yield. The scheme has two variants: RMSE XII-Regular and RMSE XII-ICDD.

Under RMSE XII, the loan amount depends on the applying company’s repayment capacity, and the repayment period can be up to five years. The scheme covers various activities such as manufacturing, services and trading. The eligibility criteria for MSEs are three years of operational history and demonstrated profitability in the past two years.

2. SIDBI Revolving Fund for TIFAC

This fund provides refinancing assistance to PLIs when lending to MSMEs for technology upgradation under the Technology Information Forecasting and Assessment Council (TIFAC) programme. Under this, the government aims to promote innovation and research in MSMEs by facilitating their access to technology from diverse sources such as research institutions, universities, and more.

The funding can go up to Rs. 100 lakhs per unit and the repayment period is six years (including a moratorium) starting from the project completion date. The interest rate on the funding has a cap of 5% per annum.

3. Receivable Finance Scheme

This SIDBI scheme provides refinancing assistance to PLIs for the discounting or factoring of receivables for MSMEs. It aims to enhance MSMEs’ liquidity and cash flow by enabling them to sell their invoices or bills at a discounted rate to PLIs.
The scheme’s funding criteria depend on the needs of the MSMEs. In the case of large purchase corporations, the funding limit can be Rs. 50 crores at most. The approved limits are valid for one year.

4. Refinance Assistance to MSMEs for the Purpose of Export (RAMPE)

This SIDBI scheme provides refinancing assistance to PLIs for lending at attractive interest rates to MSMEs engaged in export activities. The funding is subject to an exposure limit set by SIDBI for each bank and various other parameters. The repayment period can extend up to five years. The scheme covers both pre-shipment and post-shipment finance for exports.

Disclaimer: The interest rates for both direct and indirect SIDBI financing products are subject to change. Please refer to the bank’s website before applying for any of these schemes.

How to Apply for a SIDBI Loan

Here are the steps involved in the SIDBI loan application process:

Visit the bank’s official website at https://sidbi.in/en/
Under the ‘Direct Loans’ option, you can find various SIDBI schemes
Click on ‘’ under the Preferred Loan Product box
Click on ‘Registration Form’
Enter your enterprise’s name, email address, and the mobile number registered with Udyam, and create a password
again on the SIDBI portal, choose the relevant scheme, and enter the required loan amount
Share basic details such as the business address, district, and pin code
SIDBI officials will then send a confirmation mail to the email address provided. Once the applicant agrees, the next steps will involve application evaluation and disbursement.

Documents Required for SIDBI Schemes

The list of documents necessary for SIDBI loan processing varies for each scheme. However, the following are the most common documents required:

Application form; this must be duly filled and signed by the applicant
KYC documents of the applicant and co-applicants
Business profile and project report
Audited financial statements for the past three years
Provisional financial statements for the current year
Bank statements for the past six months
Copy of the Udyog Aadhaar Memorandum (UAM)
Copy of the GST registration certificate (if applicable)
Copy of consent for establishment from the Pollution Control Board (if applicable)
Copy of sanction letters from other lenders (if any)
Proforma invoice or quotation of items to MSMEs that wish to purchase
Any other document as required by SIDBI.

Benefits of SIDBI Schemes

SIDBI schemes offer several benefits. These include:

Customised Products: SIDBI understands that different MSMEs have varying needs and challenges. Thus, the bank offers customised loans that suit your business requirements. You can choose from various loan products that cater to your specific purpose, such as purchasing equipment, expanding production, upgrading technology, developing new products, and more. You can also avail of loans for working capital or receivables financing.
Attractive Interest Rates: SIDBI offers loans at attractive interest rates that are lower than market rates. This is because the bank has tie-ups with various lenders and foreign financial institutions that provide funds at discounted rates. SIDBI also passes on the benefits of government subsidies and schemes to MSMEs.
Collateral-Free Loans: Some SIDBI loans are available without collateral or security, and provide funding of up to Rs. 1 crore. This makes it easier for MSMEs to access finance without worrying about pledging their assets. SIDBI also covers some of its loan products under the Credit Guarantee Scheme.
No Tempering of Company Ownership: SIDBI does not interfere with the ownership or management of your company when you take a loan. You retain full control over your business decisions and operations and the bank only monitors the performance and repayment of your loan.
Transparent Procedures: SIDBI follows a transparent and simple procedure for loan application and sanction. You can apply online through its portal or mobile app and upload the required documents. The bank evaluates your loan proposal based on factors such as your credit score, business profile, and financial statements. You can enjoy the convenience of monitoring your loan application status online.
Special Assistance: This SIDBI function includes mentoring, capacity building, and advisory services to enhance business skills, technology adoption, and market access. The non-financial aid supports project preparation, feasibility studies, market research, and skill development programmes. These initiatives empower small businesses with the knowledge, tools, and expertise to navigate challenges.
Flexible/Customised MSME Business Loans: Startups and small-scale enterprises sometimes struggle to get adequate financing for their operations. SIDBI provides numerous lending programmes to their consumers. If a person has a specific need, the institution can issue customised MSME loans for businesses based on the needs of the business. This personalised strategy assists small firms in obtaining loans for business and financing as needed.
Favourable Interest Rates: The MSME industry is hampered by high lending rates. SIDBI makes it simple for businesses to obtain working capital loans by offering low-interest rates. SIDBI is able to maintain low-interest rates because of partnerships with a range of international financial organisations.
SIDBI Loan Without Collateral: Banks typically provide business loans in exchange for collateral. SIDBI, on the other hand, offers business loans without collateral to its borrowers, and MSMEs can borrow up to Rs. 1 crore without having to present collateral.
Subsidies from the government: Whenever the government chooses to subsidise MSMEs, SIDBI provides such business loans and working capital business loan programmes to entrepreneurs at a lower rate of interest than typical and with simple terms and conditions. You can use the business loan EMI calculator online to check the monthly interests/EMIs you need to pay on your business loans.
Procedure Transparency: SIDBI’s loan application and approval processes are straightforward, with no added charges. Interest rates and other costs are disclosed to lenders in advance to ensure a high degree of transparency in the lending process.
Particular Assistance: SIDBI bank offers loans to MSMEs through several SIDBI programs and aids fledgling enterprises and entrepreneurs by giving essential business insights and coaching. During the MSME business loan application process, their managers assist company owners in making the best selections.
There is no tampering with company ownership: To get financing for their firm, business owners may have to give up a portion of their shareholding. SIDBI protects business owners’ interests by providing financing and loans without impacting the ownership of the company.

Conclusion

Consumers can request business loans and financial help on SIDBI’s website. A business owner may ask for a loan via the online application procedure with only a few clicks. A person must first enroll on the SIDBI official site with login details and then pick the plan and loan amount required. Finally, personal information must be entered to finish the online application. SIDBI personnel give business loans to MSMEs after assessing the application and fulfilling the requirements. This monetary institution’s loans and credit play a significant part in the nation’s progress and development of this industry.

FAQs

Q 1 What is the full form of SIDBI and when it was Established?

The full form of SIDBI is Small Industries Development Bank of India. It is a financial institution established in 1990 under an act of parliament, and its primary aim is to promote, finance, and develop the micro, small, and medium enterprise (MSME) sector in the country.

Q 2: Does SIDBI evaluate a micro business’s credit record when providing an MSME loan?

Ans: The SIDBI institution does not accept loans based on the credit record of the small businessmen. Its principal goal is to provide financial assistance to small company units so that they may expand their operations without limits.

Q 3: What papers do I need to apply for a business loan with SIDBI?

Ans: Entrepreneurs must produce address proof, identification evidence, an Aadhaar card, a pan card, and other business-related documentation.

Q 4: Who is eligible to apply for a SIDBI loan?

Ans: A micro, small, or medium firm in India can apply for a direct loan from SIDBI. The agency offers a variety of appealing financing packages to both new and experienced business owners.

Q. 5 Does SIDBI provide MUDRA loans?

Ans: The Micro Units Development and Refinance Agency (MUDRA) is a SIDBI subsidiary that funds banks and NBFCs to lend to micro units under the Pradhan Mantri Mudra Yojana (PMMY) scheme. The primary objective of MUDRA is to offer loans of up to Rs. 10 lakhs to micro-enterprises operating in the manufacturing, trading, and service sectors. The scheme is further categorised into three loans: Shishu, Kishore, and Tarun.

Q. 6 What types of loans does SIDBI provide?

Ans: SIDBI offers a range of loan products tailored to the specific needs of MSMEs. This includes term loans for fixed asset acquisition, working capital finance, equipment finance, technology upgradation loans, and loans for export-oriented units. The bank also provides loans for startups and innovative ventures.

Q. 7 What are the subsidiaries of SIDBI?

Ans. SIDBI’s most important subsidiaries are:

Micro Units Development and Refinance Agency (MUDRA Bank)
India SME Technology Services Limited (ISTSL)
India SME Asset Reconstruction Company (ISARC)
Acuité Ratings and Research Limited
Receivables Exchange of India Limited (RXIL)
Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE).

Q. 8 Is SIDBI regulated?

Ans. The Reserve Bank of India (RBI) regulates SIDBI to ensure it complies with the regulatory guidelines and norms in the financial sector.

Q. 9 Can SIDBI help MSMEs with debt restructuring or rehabilitation?

Ans. Yes, SIDBI provides support for debt restructuring and rehabilitation of MSMEs. It offers schemes and initiatives to help such firms overcome financial difficulties and revive their businesses.

Q. 10 What is the interest rate charged by SIDBI for its financial products?

Ans. The interest rates offered by SIDBI may vary based on the scheme and prevailing market conditions. These rates are typically competitive and conducive to the needs of small businesses.

Q. 11 How do I get more information about SIDBI loan schemes?

Ans. For more information about SIDBI loan schemes, you can visit the bank’s official website, which provides detailed information about various loan schemes, eligibility criteria, and application procedures. You can also get information through your local SIDBI office.

Check out more Government Schemes

The post SIDBI Schemes – Full Form, Functions, and Loan Application Steps appeared first on FlexiLoans Finance, Business Loan Blogs, Tips & Guide.

RoDTEP Scheme – Benefits and Eligibility

admin — Fri, 07 Jul 2023 09:27:00 +0000

What is RoDTEP?

RoDTEP, full form Remission of Duties and Taxes on Export Products, is an export promotion scheme by the government of India. The scheme became effective from January 1 2021 and aims to offset taxes and duties incurred on exported goods. It helps in reducing the input cost of exported goods, thereby ensuring goods made in India are competitive.

The RoDTEP scheme offers rebates on all central, state, and local duties/taxes/levies on exported goods. This covers both direct and indirect costs borne by the exporters and cumulative indirect taxes at prior stages of production. The objective is to compensate for the duties/taxes/levies on goods and services used in the production and distribution of exported goods.

Objectives of RoDTEP

The objectives of the RoDTEP scheme are as follows:

Neutralise taxes and duties on exported goods
Provide relief to exporters by reimbursing the costs of hidden taxes and duties
Reduce the burden of input costs on exporters, thereby making India-made products and services more competitive internationally
Promote, support, and encourage export activities in India by reducing the cost of exports
Facilitate economic growth by reducing the tax burden on exporters.

Features of the RoDTEP Scheme

The features of the RoDTEP scheme are as follows:

Refund of Embedded Duties and Taxes
The scheme actively promotes the export of goods and services exclusively. Earlier, exporters included taxes and duties as input costs and passed them on to their international buyers. Through RoDTEP, exporters can claim refunds and lower their selling prices. Some of the common taxes and duties for which rebates are available are:
1. Duties on the purchase of electricity
2. VAT and excise duty on fuel used on transportation cost for diesel generator (DG) sets and power plants
3. Stamp duty on export documents
4. Property tax/municipal tax/mandi tax.
WTO Compliance
RoDTEP is a policy compliant with World Trade Organization (WTO) guidelines and is designed to assist exporters in meeting international standards. The scheme enables exporters to enhance their goods’ cost competitiveness in the global market. By providing assured duty benefits, it supports exporters in offsetting taxes and making their products more attractive to international buyers.
Multi-Sector Strategy
The scheme ensures uniformity across all sectors. However, certain sectors like steel, pharmaceuticals, and organic and inorganic chemicals are excluded at present from the benefits provided.
Digitalisation and Transparency
The RoDTEP scheme emphasises digitalisation and transparency in the application and processing of rebates. It aims to simplify the procedures by leveraging technology and ensuring quick disbursal of benefits to exporters.
Complementary to Other Schemes
The scheme is complementary to existing export promotion schemes such as the Merchandise Exports from India Scheme (MEIS). It provides an additional benefit by covering taxes and duties not addressed by other schemes.

These features collectively make the RoDTEP scheme a comprehensive mechanism for compensating exporters for the taxes and duties incurred on exported goods, thereby supporting and encouraging export activities in India.

Eligibility for the RoDTEP Scheme

Here are the key eligibility criteria for the scheme:

Most sectors, including textiles, can enjoy the benefits provided, with the exception of certain industries such as steel, pharmaceuticals, and organic and inorganic chemicals.
The scheme will give priority to labour-intensive sectors that already receive benefits under the MEIS.
Both manufacturer exporters and merchant exporters (traders) are eligible for the scheme.
There is no specific turnover threshold required to claim the RoDTEP scheme benefits.
Re-exported products are not eligible for benefits under the scheme; only products of Indian origin are eligible.
Special economic zone (SEZ) units and export-oriented units (EOUs) are eligible for the benefits.
The scheme also applies to goods exported via courier through e-commerce platforms.

Exporters need to meet these eligibility criteria and adhere to the guidelines provided by the government and the relevant authorities to enjoy the benefits of this scheme.

Sectors Ineligible for RoDTEP

The following categories of exports/exporters are not eligible for rebate under this export promotion scheme:

Export of imported goods meant for re-export
Trans-shipment exports, where the goods originate in a third country but pass through India
Export products that are subject to a minimum export price or export duty
Supplies of products from domestic tariff area (DTA) units to SEZ and free trade warehousing zone (FTWZ) units
Products manufactured in electronic hardware technology parks (EHTPs) and biotechnology parks (BTP)
Products manufactured or exported by units licenced as 100% EOUs
Goods that have been put to use after manufacture.

Importance of the RoDTEP Scheme in India

The government introduced this scheme to address various needs and challenges faced by exporters in the country. The key needs for implementing this scheme are as follows:

Boost Export Competitiveness: The scheme aims to enhance the competitiveness of Indian exports in the global market. Reducing the embedded taxes and duties on exported goods helps exporters offer their products at more competitive prices.
Neutralise Unrefunded Taxes: Previously, various taxes and duties applied on exported goods, which led to an increase in costs for exporters. The RoDTEP scheme neutralises these unrefunded taxes and levies, thus ensuring a level playing field for Indian exporters.
Address Hidden Taxes and Duties: The previous embedded taxes and duties in exported goods stemmed from various central, state, and local bodies, which led to hikes in costs. This scheme targets these hidden taxes and aims to provide relief to exporters by refunding or remitting them.
Support Cash Flow for Exporters: In the past, exporters often faced challenges in terms of blocked working capital due to the unavailability of timely refunds on taxes and duties. The RoDTEP scheme helps in addressing this issue by providing assured duty benefits and improving cash flow for exporters.
Promote Export-led Growth: The government’s objective is to promote export-led growth as a driver of the economy. By reducing the burden of taxes and levies, this scheme incentivises exporters and encourages them to expand their export activities, contributing to economic growth and employment generation.
Align with International Trade Standards: RoDTEP helps Indian exporters meet international trade standards by making their goods cost-competitive in the global market. It aims to align India’s export policies with international norms, enhancing the country’s export performance.

Overall, the RoDTEP scheme addresses the needs of exporters, promotes export competitiveness, supports cash flow, and contributes to the growth of India’s export sector while aligning with global trade standards.

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Conclusion

The RoDTEP scheme has emerged as a significant policy initiative in India, aiming to boost export competitiveness and provide much-needed relief to exporters. By refunding or remitting unrefunded taxes and duties on exported goods, the scheme promotes a level playing field and enhances the country’s export potential. Its inclusive nature, covering a wide range of various sectors and industries, reflects the government’s commitment to supporting a variety of exporters.

However, it is essential for exporters to understand the eligibility criteria and comply with the scheme’s guidelines to fully benefit from it.

Frequently Asked Questions (FAQs)

Q. 1 What is the full form of RoDTEP?
Ans: The full form of RoDTEP is the Remission of Duties and Taxes on Export Products.

Q. 2 Which goods and services are eligible for benefits under RoDTEP?
Ans: This scheme actively extends its benefits to most goods and services exported from India, except in certain ineligible sectors.

Q. 3 Which sectors are currently excluded from the benefits of the RoDTEP scheme?
Ans: Sectors such as steel, pharmaceuticals, and organic and inorganic chemicals, are currently excluded from the benefits of this scheme.

Q. 4 Are re-exported products eligible for benefits under the RoDTEP scheme?
Ans: No, re-exported products are not eligible for benefits under this scheme. All of the applicable exported products and services must originate in India.

Q. 5 Does the RoDTEP scheme comply with WTO regulations?
Ans: Yes, this scheme is compliant with World Trade Organization (WTO) regulations.

Q. 6 How does the RoDTEP scheme support exporters?
Ans: This scheme supports exporters by providing assured duty benefits, neutralising unrefunded taxes, and improving cash flow.

Q. 7 What is the RoDTEP scheme?
Ans: RoDTEP (full form: Remission of Duties or Taxes on Export Products) is an Indian government initiative that aims to refund unrefunded taxes and duties on exported goods, thus enhancing the country’s export competitiveness.

Q. 8 When was the RoDTEP scheme introduced?
Ans: The government of India introduced this scheme in 2021. It became effective on January 1 2021 and is valid until 2025.

Q. 9 Can RoDTEP and MEIS benefits be claimed simultaneously?
Ans: No, it is not possible to claim RoDTEP and Merchandise Exports from India Scheme (MEIS) benefits simultaneously.

Q. 10 Can there be a remission of arrears from one financial year to the other under RoDTEP?
Ans: This scheme actively prohibits the carrying over of remission of arrears or contingent liabilities to the next financial year.

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Startup India Scheme, Benefits, Registration Process

admin — Tue, 04 Jul 2023 16:09:00 +0000

In today’s era of entrepreneurship, where innovation meets passion, the Indian startup ecosystem is generating various creative ideas with a lot of determination. People are now more aware of the benefits of starting their own brand, with social media and TV shows such as Shark Tank boosting entrepreneurship in the country.

The government has also been taking several steps to boost startups in India as they significantly contribute to economic growth by creating job opportunities and introducing new technologies. For example, Apple, Google and Microsoft were all startups once and they are now transforming the world.

One groundbreaking initiative by the government for Indian entrepreneurs is Startup India. You can enjoy the benefits of this scheme if you have a new business or wish to start one. Read on to learn more about this exciting initiative.

What is Startup India?

India has a huge young population. According to the United Nations Population Fund’s State of the World Population Report 2023, the country has one of the largest youth populations in the world, with around 254 million individuals in the 15-24 year age bracket. Moreover, its sizeable student population and strong academic culture help promote innovation and an entrepreneurial mindset, ultimately boosting the startup culture.

With this in mind, the government rolled out the Startup India initiative in 2016, with a corpus of Rs. 10,000 crores. This scheme aims to promote startups, create job opportunities and generate economic wealth. It offers various benefits and incentives to startups, such as tax exemptions, funding support, fast-track patent applications, and simpler compliance regulations.

Startup India also provides mentorship, networking opportunities, and access to resources and facilities that can help entrepreneurs thrive in the country’s competitive business landscape. The initiative is broadly managed by a dedicated team that reports to the Department for Industrial Policy and Promotion (DPIIT), highlighting its importance at the governmental level.

Under the guidance of DPIIT, the Startup India team carries out a range of tasks, such as developing and executing strategies to attract investments, supporting startups with funding opportunities, and offering various incentives and benefits to these firms. They also coordinate with other government departments and agencies to streamline processes, remove hurdles, and ensure seamless support for startups.

Small Industries Development Bank of India (SIDBI) runs the Startup India loan scheme and is a dedicated financial institution that focuses on the growth and development of small and medium-sized enterprises (SMEs) in the country. SIDBI plays a pivotal role in assessing the viability of startup business models and providing them with the necessary financial support.

Through the Startup India loan scheme, SIDBI aims to address the funding gap that many startups face in their early stages. By offering financial assistance in the form of loans, startups can access the capital needed for various purposes such as product development, marketing, and operational expenses. This support not only helps such firms survive during their initial years but also enables them to expand and create employment opportunities.

Why was Startup India Established?

In the past, starting a company or business in India posed significant challenges, leading many businesses to relocate to other countries. With the introduction of the liberalisation programme in 1991, these limitations were substantially reduced by the government. However, in the process, certain measures were put in place to control and regulate the economy, including regulations such as Licence Raj, land permits, foreign direct investment plans, and investment clearances.

Take Licence Raj for example, which was a system where companies needed to obtain multiple licences and permits from the government to start operations. The aim was to ensure that businesses complied with certain regulations, maintained quality standards, and did not engage in illegal activities. However, while this system looked to protect consumers and ensure fair competition, it often resulted in bureaucratic red tape and corruption, thus hampering economic growth to an extent.

With the Startup India scheme, the government is aiming to eliminate such issues for startups in the country, such as complex regulations, and limited access to resources and support systems, thus helping position India as a global hub for innovation and technology.

Features of the Startup India Scheme

1. Financial Support

Startup India provides financial support to startups in various forms. These include:

Fund of Funds scheme: This aims to support firms by providing them with access to venture capital funds managed by professional fund managers.
Credit guarantee schemes: These help startups avail of loans and credit from banks and financial institutions, and help provide collateral-free loans and credit, reducing the financial burden and risk for these young companies.
Government schemes: Startup India enables eligible firms to enjoy access to various government schemes and initiatives that provide grants, subsidies, and incentives. These schemes cover a wide range of areas such as research and development, intellectual property protection, marketing and branding, and infrastructure development.
One such initiative is the Startup India Seed Fund Scheme, under which eligible companies can receive seed funding of up to Rs. 20 lakhs, which can help support activities such as market validation, prototype development, product trials, and more.

2. Government Support

New businesses require a significant amount of funds to set up and access to government support can help with collecting these funds. Typically, it is not easy to get government support, but under the Startup India scheme, eligible firms receive greater priority in getting government help without having prior experience.

3. Ease of Work

With the Startup India portal, the government has built a system where you can incorporate and register your startup, solve queries and more, which makes the process easy. Plus, you can register your startup from the portal online from anywhere, guaranteeing convenience. The Insolvency and Bankruptcy Bill passed in 2015 enables new startups to start operations within 90 days of initiation.

4. A Place to Network

Startup India gives startup owners amazing networking opportunities where they get to meet various startup stakeholders at a particular place and time. The government organises two yearly events – one for domestic companies and the other for international companies. Moreover, Startup India also arranges intellectual property awareness workshops and awareness campaigns.

5. Tax Exemptions Under Section 80 IAC

The scheme exempts startups from paying income tax for the initial three years based on the following criteria:

The company must be registered with DPIIT
The company must have started operations after 1 April 2016, since Startup India came into existence in 2016.
Note that private limited companies and limited liability partnerships are eligible for tax deductions under section 80 IAC.

6. Tax Exemption Under Section 56

Section 56 is a provision in the Income Tax Act that exempts certain types of income from being taxed. This provision looks to encourage investment and entrepreneurship by providing tax benefits to individuals or businesses, including those that invest in eligible startups with a net worth of over Rs.100 crores or a turnover of over Rs. 250 crores (per Section 56 (2) of the Income Tax Act).

Eligibility for Startup India

The following types of businesses can apply under this scheme:

Partnership organisations
Limited liability partnership (LLP) enterprises
Private limited companies.

The eligibility criteria for Startup India are as follows:

DPIIT must approve the startup.
The company must not be more than five years old.
The annual turnover of the company must not be more than Rs. 25 crores.
The startup owner will need to submit a reference letter from a start-up incubator.
The firm must deal with unique products or services.
The company must promote employment generation.
The start-up should not have been established as the result of the dissolution of another business.

Documents for Registration Under Startup India

Here are the documents required to register your startup under the Startup India scheme:

Certification of incorporation
PAN card of the company
MSME registration, GST registration, and trademark registration certificate, if available
Company’s website or profile
Details of the company’s directors
Revenue details.

Startup India Application Process

Completing the application process is essential if you are looking to enjoy the scheme’s benefits. Follow these steps:

Step 1: Register your company as a legal entity, such as a partnership firm, private limited company, or limited liability partnership.

Step 2: Register your startup on the Shram Suvidha Portal of the Ministry of Labour and Employment.

Step 3: Obtain Department for Promotion of Industry and Internal Trade (DPIIT) approval, fill out the ‘Startup recognition’ form, and accept the terms and conditions.

Step 4: Upload documents such as the certificate of incorporation, PAN card, and patents. Ensure you upload the original documents to avoid penalties.

Step 5: Once you have completed the process, you will receive the Startup India registration number in around 48 hours.

Differences between the Stand-Up India Subsidy and Startup India

Like Startup India, the Stand-up India subsidy is an initiative launched by the government to support startups in the country. Fundamentally they have the same features, but each has different objectives and focuses on varying sections of society. Let’s take a look at some of the key differences:

The Startup India scheme aims to support startups that do not have a high turnover and that meet the definition of a startup. In contrast, Stand-up India is a more specific SC, ST government loan scheme that focuses on the ST and SC classes as well as women entrepreneurs.
The Startup India loan scheme gives eligible firms access to extra funding sources to help expand their business and also enables them to enjoy tax benefits. Stand-up India is more specific and provides SC/ST subsidy loans for business; it allows these sections of society as well as women entrepreneurs to apply for loans ranging from Rs. 10 lakhs to Rs. 1 crore.
Only companies under five years old can apply for Startup India, while Stand-up India allows SC, ST, and women entrepreneurs to avail of SC/ST subsidy loans for business.
While the Startup India loan scheme covers a maximum of 80% of a project’s total cost, the Stand-up India subsidy covers up to 75% of the total cost.
Under the Startup India loan scheme, partnership firms, limited liability partnership enterprises, and private limited companies are eligible to get funding. On the other hand, Stand-up India provides loans only for greenfield projects, which means it should be the beneficiary’s first foray into the trading or manufacturing services segment.

Challenges Faced by Startup India

Here are some crucial challenges faced by this initiative:

The government has set aside funds of Rs. 10,000 crores to utilise for startups in the next four years, which is a short-term plan and does not focus on the long-term growth strategies of startups.
For the success of any business, it is important to hire a skilled workforce, but startups face a crunch here as they usually do not have sufficient funds in the initial stage.
Startups often face higher chances of failure compared to established companies, primarily because they take swift action and generate their business model rapidly.

FAQs

Q. 1 What is the Startup India Scheme?

Ans: To promote the startup culture in India, the government launched an initiative known as Startup India in 2016. The main aim of this scheme is to provide better services, innovate new products and boost employment in India.

Q. 2 What is the government’s role in Startup India?

Ans: The government’s role in Startup India is to provide support and create an enabling environment for startups to thrive. It has launched various initiatives and programmes to promote entrepreneurship and facilitate the growth of eligible firms. These include:

Funding support
Incubation and acceleration support
Intellectual property rights (IPR) protection
Skill development and training programmes.

Q. 3 What is the income tax benefit under the Startup India loan scheme?

Ans: Companies registered under the Startup India loan scheme are exempt from paying income tax in the initial three years of operations. However, they will have to get a certificate from the Inter-Ministerial Board as well as invest in specific funds.

Q. 4 Can I avoid registering my startup under the Startup India scheme?

Ans: You cannot avoid registering your startup under the Startup India scheme as it is mandatory. You can complete the process easily online on the Startup India digital portal.

Q. 5 Can I build a network using the Startup India scheme?

Ans: Startup India allows startup owners to connect with other entrepreneurs and learn about their businesses. Every year, two networking events are held by the government, one for domestic companies and the other for international firms.

Q. 6 What is the basic requirement I must fulfil to register for the Startup India scheme?

Ans: To register for the Startup India scheme, your company should either be a private limited company or a limited liability firm, and it should not be more than five years old.

Q. 7 How long does the winding-up process take for startups in India?

Ans: According to the Insolvency and Bankruptcy Code of 2016, startups with a simple debt structure can be wound up in 90 days by filing for insolvency.

Q. 8 Is it easy to dissolve a startup in India?

Ans: As per the Indian government’s regulations, winding up a startup is easy and simplifies the reallocation of resources. This means you can easily dissolve your startup and use those resources in a better place, which encourages entrepreneurship.

Q. 9What are the eligibility criteria to fulfil for exemption under Section 56?

Ans: There are three basic criteria that you need to fulfil for exemption under Section 56:

Your company should either be a private limited company or a limited liability company.
The Department of Promotion of Industry and Internal Trade (DPIIT) should recognise your company.
You must be investing only in specific sectors and not in immovable properties.
Evaluators must assess your eligibility based on your investments, turnovers, loans, and capital investments.

Q. 10 For how long does recognition as a startup stay valid under the Startup India scheme?

Ans: Recognition as a startup under the Startup India scheme is valid for a period of 10 years from the date of the firm’s incorporation. However, it is important to note that these firms will have to fulfil certain criteria and comply with the ongoing requirements of the scheme to maintain their recognition status. It is advisable to regularly check for updates and guidelines provided by the government to ensure continued eligibility.

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PLI Scheme in the Textile Industry – A Guide

admin — Mon, 03 Jul 2023 08:44:00 +0000

Introduction

Food, shelter, and clothing are the basic needs of human beings in society. In India, with the second-largest population globally, employment opportunities for the masses are paramount. The textile sector is one such sector that can provide employment opportunities to both skilled and unskilled workforce.

This is because the textile sector is labour-intensive. Presently, it provides employment opportunities to about four crores, fifty lakh people. It is the second-largest sector in employment creation, with the agriculture sector being the first one. In addition, India has a rich heritage with regard to textiles, fabrics, and apparel from ancient times.

Hence, to promote the textiles sector and other sectors, the Union government has started the Production Linked Incentive (PLI) scheme for textiles. This scheme would be operational for nine and half years (24/09/2021 to 3/03/2030), and incentives would be payable to selected companies for five years.

PLI Incentive Updates

In recent updates, production-linked incentive (PLI) schemes have demonstrated remarkable outcomes in India, including increased production, job creation, and exports. These schemes have attracted a whopping 76% rise in foreign direct investment (FDI) in the manufacturing sector, reaching $21.34bn in 2021-22. With an incentive outlay of around $26bn (Rs. 1.97 lakh crores), PLI schemes are here to stay to boost production capabilities and create global champions in 14 sectors.

With 733 approved applications in these 14 sectors and an expected investment of Rs. 3.65 lakh crores, PLI schemes have already realised an actual investment of Rs. 62,500 crores. This has led to a remarkable boost in production and sales, exceeding Rs. 6.75 lakh crores, as well as the creation of around 325,000 jobs by March 2023.

For example, one PLI scheme has successfully convinced major smartphone companies to relocate their suppliers to India. Within a mere three years, India has achieved a significant value addition of 20% in mobile manufacturing, outperforming Vietnam’s 18% achieved over 15 years and China’s 49% achieved over 25 years.

November 2020

PLI schemes rolled out in the following sectors in November 2020:

Sector	Overseeing Department
Prescription Medications	Department of Pharmaceuticals
Technology or Electronic Products	Ministry of Information and Electronics Technology
Networking and Telecom Products	Department of Telecommunications
Food Products	Ministry of Food Processing Industries
ACS and LED (White Goods)	Department for Promotion of Industry and Internal Trade
Energy-Efficient Solar PV Modules	Ministry of New and Renewable Energy
Auto Components and Automobiles	Department of Heavy Industry
ACC (Advance Chemistry Cell) Battery	Department of Heavy Industry
Specialty Steel	Ministry of Steel
MMF Segment and Technical Textiles	Ministry of Textiles

PLI schemes rolled out in the following sectors in March 2020:

March 2020

Sectors	Overseeing Departments
Drug Intermediates (DIs), Key Starting Materials (KSM) and Active Pharmaceutical Ingredients (APIs)	Department of Pharmaceuticals
Electronics Manufacturing on a Large Scale	Ministry of Electronics and Information Technology
Medicinal Devices Manufacturing	Department of Pharmaceuticals

Read on to discover the incredible benefits and potential of PLI incentives as well as their significance.

Objectives of PLI Schemes

PLI schemes are transformative and work towards enhancing India’s compliance with World Trade Organization (WTO) commitments and promoting a non-discriminatory and neutral environment for domestic sales and exports.
The schemes provide active support to food manufacturing companies that meet the eligibility criteria, enabling them to expand their processing capacities, establish strong brands abroad, and become global champions in their industry.
By strengthening Indian food product brands, PLI schemes aim to enhance their global visibility and acceptance, resulting in increased employment opportunities beyond farming.
These schemes safeguard farmers’ income by ensuring fair and lucrative prices for agricultural products.

Salient Features of PLI Schemes

These initiatives help bring back ancient designs and customs, empowering neglected traditions in the country.
Increased production under PLI schemes drives growth and development in various sectors.
Focus on manpower and creativity fosters adaptable building systems that help combat climate change and potentially reverse its effects.
Through PLI schemes, the government encourages investment in plants and machinery to meet specified requirements during the first two years of operation.
A significant allocation of Rs. 10,900 crores in the central sector is available for investment.
The schemes provide incentives for production in essential food categories such as ready-to-eat foods, millet-based products, processed fruits and vegetables, seafood products, and mozzarella cheese.
The duration of the PLI schemes spans six years, from 2021-22 to 2026-27, revolutionising industries and creating opportunities for all.
These schemes cover small businesses that create innovative and organic products like free-range eggs, poultry meat, and egg products.
Entities specialising in innovative and organic products are exempt from the minimum sales and mandatory investment requirements.
PLI initiatives provide support for branding, marketing, and grants for signage, shelf space, and international marketing, with the overarching aim of promoting the development of strong Indian brands globally.

Targets and Strategies for Implementation Under PLI Schemes

PLI schemes are implemented nationwide, incorporating specific goals and strategies.
Specific project management agencies (PMAs) are responsible for implementing these initiatives. They will evaluate applications, verify eligibility, and process incentive payments.
PLI incentives will be available over six years, ending in 2026-27. The following year will see incentive payments being made annually.
A set fund limit ensures controlled costs for these schemes. Each beneficiary will have a maximum incentive predetermined, which they cannot exceed regardless of their performance.
The PLI programme aims to expand processing capacity by 2026-27, resulting in the production of processed foods worth a total of Rs. 33,494 crores and creating job opportunities for around 2.5 lakh people.

Methodology and Mechanisms Associated with PLI Administration and Implementation

To enjoy the maximum benefits of PLI, there is some important information that you should keep in mind:

The cabinet secretary chairs the Empowered Group of Secretaries at the Centre, ensuring effective monitoring of these schemes.
An Inter-Ministerial Approval Committee (IMAC) will assess the eligibility of applicants and determine their approval for the schemes. IMAC will also decide on the sanction and release of PLI incentive funds.
The ministry will diligently develop an annual action plan encompassing a wide range of activities to propel these initiatives forward.
There is a comprehensive third-party evaluation process and a mid-term evaluation mechanism to ensure transparency and accountability in PLI schemes.

What is the PLI Roadmap to boost Indian manufacturing?

The Central Government has sanctioned an ambitious PLI scheme for fourteen key sectors of the economy. These sectors include pharmaceuticals, electronics, food products, textiles, etc. This scheme offers a type of subsidy to the concerned sector so that it can overcome any disadvantage faced by it. Here, incentives are offered to the Indian manufacturers when they achieve incremental sales. Incremental sales boost manufacturing in the country and create employment opportunities. It also promotes the Atma Nirbhar Bharat mission of the government. Under the PLI scheme, the government sanctions a given amount of money directly from the Union budget to a given sector.

Purpose of PLI Scheme

The PLI scheme was started to increase the scale of the domestic manufacturing industry so that imports are reduced and employment opportunities are promoted. With the PLI scheme, the government intends to bring about women’s empowerment and enhance the contribution of women to the general economy of the workforce.

Who launched the PLI scheme for textiles and other sectors?

NITI Aayog started working on developing a set of objective criteria. It involved determining value addition done by the companies which benefited from the financial rewards announced under PLI schemes. Union Finance Minister, Smt. Nirmala Sitharaman announced allocating Rs. 1.97 lakh crores for the PLI Scheme, covering fourteen key sectors. The aim is to make India a manufacturing hub, increase production to 30 lakh crore in the next five years, and generate employment opportunities.

Who can apply for the PLI scheme for the textile sector?

This scheme can be availed by any person (including company/firm/limited liability partnership/trust) who intends to start a separate manufacturing company and make a minimum investment of Rs. 300 crore for producing notified products. Incentives would be provided to companies that achieve a minimum turnover of Rs. 600 crore through manufacturing and selling such notified products in the first performance year. Before investing the required amount, each participant needs to incorporate a new company under the Companies Act, 2013.

Incentives Under PLI Scheme for Textile Sector

Incentives would be provided to the participants who achieve minimum investment and incremental turnover as specified in the scheme. The participants need to achieve the prescribed turnover target for the year and a 25% increase in turnover over the immediately preceding year’s turnover in the succeeding years. The formula for computing the incentives is as follows:

“Net Incremental Sales within the cap of Notified Product(s) excluding taxes multiplied by the Rate of Incentive in percentage for the Performance Year.”

What is the PLI Roadmap for the Textiles Industry?

Under the PLI roadmap for the textile sector, the Union government has approved 61 applications from companies. The selected applicants may bring in an investment of Rs. 19,000 crores. Out of 61 applications approved, seven are foreign companies. This potential investment under the PLI roadmap is expected to generate a turnover of Rs. 184,917 crore and employment for 2,40,134 people. The financial outlay of the government under this scheme is Rs. 10,683 crores for five years. This outlay would be applicable to give a boost to textile products such as Man Made Fabric (MMF) apparel, MMF fabrics (14 categories), and products related to technical textiles (10 categories).

The items covered under MMF fabrics include woven fabrics with nylon, polyester, and others. Technical textiles included under the scheme are defence textiles (bulletproof vests, clothing, and tents used in submarine and fighter aircraft, safety airbags, tyre cords, protective clothing such as personal protective equipment, and fabrics and clothing used against fire accidents).

Investment, Turnover, and Incentives

The applicants selected under the PLI scheme need to demonstrate the following in Part I and Part II of the scheme’s implementation:

In Part I, they are expected to invest a minimum of Rs. 300 crore and generate a minimum turnover of Rs. 600 crore. The investment would be in the plant, machinery, R&D activities, and civil works but exclude investment in land and administrative buildings.
In Part II, a minimum investment of Rs. 100 crore is required, and a minimum turnover of Rs. 200 crores. The investments would go to inspirational districts, rural areas, and Tier 2 and Tier 3 towns.

For Part I, the available incentives start from 15% for the first year, decreasing by one percentage point every year for the next four years. For Part II, the incentives start from 11% for the first year, decreasing by one percentage point every year for the next four years. For both Part I and Part II, the incentives are available only on the incremental turnover of 25%. Let us understand by an example. Let in the first year the prescribed turnover be Rs. 600 crore. Then in the second year, the prescribed turnover should be Rs. 750 crore (i.e.Rs. 600 crore + 25% of Rs. 600 crore). In the first year, the incentive is computed on Rs. 600 crores, and in the second year, the incentive is credited only on Rs. 150 crores (i.e., 25% increment on the first year’s turnover of Rs. 600 crores). This procedure continues for the five-year period.

Aims of Textile PLI Scheme

Following are the aims of this PLI scheme for the textile sector:

Through the incentives given by this scheme, textile companies operating in India and also textile workers can compete with the Chinese textile mills and undertake productive ancillary activities.
According to the commerce ministry, there is a huge demand for Indian textiles in the international markets. This PLI scheme for the textile sector intends to grab the demand by acquiring skills related to the design of MMF and garments.
Government support through this PLI scheme for the textile sector and the artisans working in this domain would create a ripple effect in other areas of the economy.
This specific textile PLI scheme is expected to increase textile parks in India. Thus, in 10 years, India may become the textile hub of the world.
The textile company management can use the grants received under the PLI for the textile sector to automate the textile factories. This would bring in economies of scale.

Sector-Wise PLI Eligibility Criteria

PLI eligibility varies based on the approved industry. Here are some of the criteria:

Telecom units need to meet investment growth and manufacturing sales requirements.
MSME companies can receive investments of up to Rs. 10 crores, while other companies can receive investments of up to Rs.100 crores.
SMEs and other companies must have at least 50% of their subsidiaries compliant with food processing regulations.
SME selection considers factors such as the firm’s proposal, product innovation, and level of product development.
Pharmaceutical businesses must undertake greenfield projects and maintain a net worth of at least 30% of total investments.
Domestic value addition (DVA) requirements stand at about 90% for fermentation-based products and at least 70% for chemical syntheses.

PLI Scheme Contribution towards Employment Generation

Since the creation of these schemes, India’s processing capacity has continued to expand, resulting in a substantial processed/ready-to-eat food output of Rs. 33,494 crores. Furthermore, these initiatives will pave the way for the creation of employment opportunities for nearly 2.5 lakh individuals by the year 2026-27.

PLI Schemes and Custom Duty

These schemes actively reduce customs duty, to the benefit of certain industries including raw material importers in the textile industry, as well as the shipping sector. The reduction in customs duty positively impacts shipping costs and ensures the long-term viability of central public sector industries. The PLI schemes also improve logistics and infrastructure related to railways, shipping, and highways. In this regard, the government has allocated Rs. 15,700 crores for the establishment of new shipping lines.

PLI schemes have also resulted in the re-evaluation of 400 customs duty exemptions and concessions. In addition, the announcement of Manufacturing and Other Operations in Warehouse Regulations (MOOWR) enables considerable duty savings for eligible companies.

India’s Textile and Apparel Exports from 2018 to 2022

Here is the data on India’s textile and apparel exports from fiscal year (FY) 2018 to FY 2022:

Commodity	2017-18	2018-19	2019-20	2020-21	2021-22
Textile and apparel (including handicrafts)	$37.55bn	$38.40bn	$35.18bn	$31.59bn	$44.44bn

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Conclusions

The Textile and garment sector is the backbone of the fashion industry. With its wide variety of clothing and fabrics, India can become the global leader in this sector. This PLI scheme for textiles and other related areas can go a long way in helping this sector. It has laid out a unique PLI roadmap to achieve its true potential in terms of exports. In a nutshell, the textile sector can carve out a niche in international trade and commerce.

Check out more Government Schemes