What is the PLI Scheme?
The Production Linked Incentive (PLI) Scheme is a central government scheme, notified in April 2020 as a part of ‘National Policy on Electronics’ for large scale electronics manufacturing. The aim of the scheme is to provide financial incentives for domestic manufacturing of goods and attract large investments in value chain. Following the success of a scheme to locally produce mobile phones and their components, the government plans to extend this financial incentive scheme to domestic manufacturing of essential electronic gadgets such as laptops and tablets. The scheme was subsequently rolled out for pharmaceutical ingredients and medical devices. The PLI Scheme aims at making India a self-reliant nation.
Key Features of the Scheme:
- Extend an incentive of 4% to 6% on incremental sales (over base year) of goods manufactured in India, for a period of five years with financial year 2019-20 as the base year for calculation of incentives.
- A nodal agency, acting as a Project Management Agency (PMA), is responsible for effective implementation of the scheme and for providing support.
- The ambit of the scheme will be expanded with the inclusion of about ten more sectors with an estimated outlay of ₹1.46 lakh crores over the next five years. They include food processing, telecom, electronics, textiles, speciality steel, automobiles and auto components, solar photo-voltaic modules, air-conditioners and LEDs.
- The scheme for pharmaceutical ingredients and medical devices seeks commitment from applicants for investments to build capacities. The government will pay a specific proportion of their turnover as an incentive for the next few years. The scheme focuses on building economies of scale in over 50 critical active pharmaceutical ingredients.
- 22 companies have already registered for the PLI scheme. These include global companies like Samsung, Foxconn Hon Hai, Rising Star, Wistron, and Pegatron and Indian companies like Lava, Dixon Technologies, Bhagwati (Micromax), Padget Electronics, Sojo Manufacturing Services, and Optiemus Electronics.
- India received commitments to make mobile phones and their parts worth ₹ 11.5 lakh crores, against this scheme.
- The total incentives over five years have been kept at ₹40,951 crore.
Eligibility for the Scheme:
1. Companies that make mobile phones (₹15,000 or more) will get an incentive up to 6 per cent on incremental sales of phones made in India.
2. Companies which are owned by Indian nationals and make such mobile phones are entitled for ₹200 crore incentive during next four years.
3. Investments on land and buildings are not eligible.
4. Expenditure incurred on plant, machinery, equipment, R&D and transfer of technology for the manufacture of mobile phones and related electronic items are eligible.
What is it expected to achieve for India?
Over five years, the scheme is expected to:
• Result in production worth ₹10.5 trillion, exports contributing to more than 60%.
• Garner an investment of ₹11,000 crore and create 300,000 direct jobs.
• Reduce imports by focussing on domestic market.
• Attract foreign companies and encourage local companies to establish/ expand existing facilities.
• Comply with WTO (World Trade Organization) commitments and ensure non-discriminatory and neutral approach in domestic sales and exports.
Who are the beneficiaries till date?
- Electronics manufacturers and pharmaceutical companies.
- The new sectors that will benefit are auto and auto components, drug manufacturing, telecom, textiles, food, solar photovoltaic modules, air-conditioners and LEDs, specialty steel, electronics and advanced chemistry cell batteries.
Who can apply under the PLI Scheme?
Companies registered in India and manufacturing goods covered under the target segments of the scheme.
Applicants can operate existing or new manufacturing units at more locations in India.
What are the issues and challenges with the scheme?
- Creating a level playing field to attract reputed MNCs to create manufacturing facilities in India.
- Aligning with global regulatory framework.
- Maintaining global standards of quality, safety and eco-friendly operations.
- Ensuring supply chain efficiency to boost exports by acquiring and developing advanced product and process technologies.
Conclusion
Production Linked Incentive scheme relieves the government from making investments in capital intensive sectors.
The scheme has the potential to attract FDI and boost domestic manufacturing, setting up capacities, generating jobs and creating an enabling environment to compete globally.
The key to the success of this scheme rests in its implementation.
References
- MeitY: Production Linked Incentive Scheme (PLI) for Large Scale Electronics Manufacturing
- Business Standard: PLI scheme to boost solar manufacturing, reduce import dependence
- LiveMint: Centre may extend PLI to laptop and tab manufacturing
- JagranJosh: Production Linked Incentive: Know What is PLI scheme; List of Sectors included under it & Other Details
- InsightsIAS: Production-linked incentive (PLI) scheme
- MoneyControl: Explained | What is production linked incentive scheme?
Contributor
Prof. Bulusu Bhaskara Rao
Prof. Bulusu Bhaskara Rao has been working in the Academic Wing of Icfai Foundation for Higher Education since 2013, as a Subject Matter Expert in Operations Management.
Prior to this he worked in a Public Sector Organization for 37 years.
He won national awards for studies on Sickness in Industries and HRD.
He is an MBA from Osmania University and MSc Tech from Andhra University.
His areas of interest include Supply Chain Management, Quality Management, Sustainability Management and Corporate Communications.
Good article!
But wonder what impact will Wistron vandalism in Karnataka create on such initiatives!