Introduction of PLI Scheme to 10 Key Sectors

Initially launched in March 2020, India’s production linked incentive scheme (PLIS) targets three industries: mobile manufacture and electric components, pharmaceutical (important key starting materials/active pharmaceutical ingredients), and medical device manufacturing. Since then, the PLI concept has been broadened, with schemes being launched in various industries to strengthen India’s manufacturing capabilities and stimulate export-oriented production. Due to the importance of the PLI scheme, it is hoped to expand capacity in the local supply chain, which is a must for the company, establish new downstream businesses, and encourage investments in high-tech manufacturing. Read out the article to know what are the industries that are going to benefit from the PLI scheme.

How do linked incentive schemes work?

The PLI framework enables India to take definitive steps in the near term to expand the manufacturing potential of the economy. The pillars of the policy are: 

• Creation of large-scale manufacturing capacity: We expect investors to be forced to build large-scale manufacturing facilities because the rewards are directly proportionate to production capacity/ incremental turnover. Also expected are improvements in industrial infrastructure, which will benefit the entire supply chain ecosystem as a result of the project.

• Employment generation: It is believed that the PLI projects will make use of India’s vast people resources and provide opportunities for upskilling and technical education because large-scale manufacturing necessitates a huge workforce.

Implementation of the schemes

During a four- to six-year period, the PLI schemes pay qualified manufacturing enterprises with incentives ranging from four to six per cent on incremental sales above the base year of 2019-20, depending on the programme. Direct payment – as budgeted – for domestically manufactured items by the specified beneficiaries is analogous to a subsidy being supplied through direct payment.

The amount of the incentive granted varies from sector to sector, and the savings created by PLI in one area can be used in other sectors in order to maximize results. In order to encourage significant domestic and international players to participate in manufacturing, the PLI programmes are meant to promote more inclusive growth across the country.

Expansion of Production Linked Incentive Scheme

The government intends to achieve the following objectives based on the 10 industries to which the Production Linked Incentive scheme has been extended:

As a result of initiatives such as Smart Cities and Digital India, the government hopes to make India a more integral part of the global supply chain and increase exports. By 2025, India is expected to have a USD 1 trillion digital economy, as the government anticipates an increase in demand for electronics as a result of these initiatives.

This scheme will help to make the Indian automotive industry more competitive and will help to accelerate the globalisation of the Indian automotive sector. 

• The Indian Textile Industry is one of the largest in the world, and this scheme will help attract large amounts of investment in the sector to further boost domestic manufacturing, particularly in the manmade fibre (MMF) segment and technical textiles.

• India, as the world’s second-largest steel producer, will benefit from introducing it under the PLI scheme.

Production Linked Incentive scheme will affect 10 key sectors

Following is a breakdown of how the production-related incentive plan will affect the ten most important specialised industries after they have all been implemented:

• It is expected that the ACC battery scheme will incentivize significant domestic and foreign players to invest in the development of a competitive ACC battery infrastructure in the country.

• The initiative is expected to increase the competitiveness of the Indian automotive industry as well as the sector’s global activities, according to the government.

• In the telecom sector, the programme is projected to draw significant investments from global players while also assisting domestic enterprises in capitalising on growth prospects in order to become key players in the international export market.

• The initiative is expected to attract significant investment in the sector, which will help to further promote local production, particularly in the MMF segment and technical textiles sectors.

• Incentives for domestic and international businesses to invest in large-scale solar PV capacity in the country will be provided through a focused plan for solar PV modules, which will aid in the capture of global value chains for solar PV production.

• In the speciality steel sector, a PLI scheme will aid in the development of manufacturing capacities for high value-added steel, which will ultimately result in an increase in overall exports.

• For the purpose of providing support through the PLI plan, specific product lines in the food sector that have high growth potential and can produce medium-to-large scale employment have been identified.

Conclusion

The Production Linked Incentive Scheme, often known as the PLI plan, was established by the government in order to encourage production, create jobs, raise exports, and reduce imports. In its current form, it encompasses 14 important industries and represents an investment of Rs 3 trillion. The PLI programmes are meant to reduce the gap between India’s highly lopsided import-export basket, which is characterised mostly by enormous imports of raw materials and finished goods, and the rest of the world’s economy. Ideally, the PLI schemes will facilitate the production of goods in India, reducing the country’s reliance on imports in the short term while increasing the volume of exports from India in the long term.