What is a PLI Scheme?
Indian Government introduced a campaign of the Production Linked Incentive Scheme that gives subsidies to companies to manufacture their goods within the country to create an Aatmanirbhar Bharat. These incentives are linked to the performance of the companies. Through this Production Linked Incentive Scheme, Government encourages the domestic companies and establishments to expand their existing businesses or set up new businesses in India to increase production for which the government will provide incentives for incremental sales.
What is the Objective of this Scheme?
The main objective of this scheme is to make domestic manufacturing competitive on a global scale and to produce manufacturing industry leaders. The scheme was specifically created to increase domestic manufacturing in strategic and emerging markets, lower import costs, and cheaper imports. Improve the cost competitiveness of locally produced goods, increase domestic capacity, and increase exports. These could be in the form of tax rebates or a reduction in import duties.
Journey of Production Linked Incentive Scheme in India
Production Linked Incentive Schemes were launched in India in March 2020, to scale up domestic manufacturing capabilities, manufacture higher import substitutions, and generate employment by providing incentives. The purpose is to attract investments in key sectors, ensure efficiency, bring economies of scale and size in the manufacturing sector, and make Indian Companies and Manufacturers globally competitive.
In November 2020, Indian Finance Minister, Smt Nirmala Sitharaman announced an outlay of INR 1.97 Lakh Crores for the Production Linked Incentive (PLI) Schemes across 14 key sectors, to create national manufacturing champions which will, in turn, create 60 lakh new jobs, and an additional production of 30 lakh crore during next 5 years. In addition to the three schemes announced earlier in March 2020, the Government of India has further introduced the following 10 new PLI schemes in November 2020 and 1 new scheme in September 2021. They are listed as follows:
- Mobile Manufacturing and Specified Electronic Components
- Critical Key Starting Materials/Drug Intermediaries & Active Pharmaceutical Ingredients
- Manufacturing of Medical Devices
- Automobiles and Auto Components
- Pharmaceuticals Drugs
- Specialty Steel
- Telecom & Networking Products
- Electronic/Technology Products
- White Goods (ACs and LEDs)
- Food Products
- Textile Products: MMF segment and technical textiles
- High-efficiency solar PV modules
- Advanced Chemistry Cell (ACC) Battery
- Drones and Drone Components.
As of June 2023, 733 applications have been approved in 14 Sectors with an expected investment of INR 3.65 Lakh Cr. 176 MSMEs are among the PLI beneficiaries in sectors such as Bulk Drugs, Medical Devices, Pharma, Telecom, White Goods, Food Processing, Textiles & Drones.
Benefits of Introducing the Production Linked Incentive Scheme in India
The PLI system encourages enterprises to enhance their manufacturing capacity by spending on plant, machinery, equipment, and associated utilities, R&D, and knowledge transfer. In turn, the government is offering incentives for increased manufacturing for up to five years. The percentage of incentives varies by sector, considering the industry’s specific demands.
Early assessments of the impact of the PLI scheme reveal favorable developments in some industries as a result of the measures. According to the Economic Survey, the PLI plan for large-scale electronics manufacturing has attracted INR 4,784 crore in investment and contributed to total production of INR 2.04 lakh crore, including exports of INR 80,769 crore (as of September 2022). According to data given by the Ministry of Electronics and Information Technology, the PLI program for large-scale electronics has emerged as the most successful scheme, creating 28,636 jobs, and resulting in a 139% rise in smartphone exports over the last three years. Similarly, the automobile and auto component industries have been targeted for the projected investment of INR 74,850 crore over five years under the scheme.
Prospects for the Future of Production Linked Incentive Scheme
As many other beneficiaries have stated, the Production Linked Incentive scheme is transforming several essential and rising businesses. This PLI Scheme will not only benefit the sectors for which it is intended, but it will greatly benefit the entire ecosystem associated with that sector.
The plans are projected to have a good impact on manufacturing, job generation, and exports. For example, the PLI scheme is expected to support the increase of food processing capacity by about INR 30,000 crores and create an extra 2.5 lakh direct and indirect job opportunities by 2026-27. Similarly, the PLI initiative in the pharmaceutical sector aims to increase domestic production of key pharmaceuticals and minimize reliance on imports.
The administration is closely monitoring the progress of the PLI schemes and making the necessary changes to improve their efficacy. Continuous engagement with industry stakeholders, process optimization, and guaranteeing ease of doing business are some of the efforts used to ensure the schemes’ smooth implementation.
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