What is the Production linked Incentive scheme in India?

Atmanirbhar Bharat Abhiyaan was launched by the central government with an objective of making India self-reliant focusing on five pillars - economy, infrastructure, system, vibrant demography and demand. In May 2020, the government 20 lakh crore package under ‘Atmanirbhar Bharat Abhiyan’ to revive the economy from the covid-19 blow. In addition, the government also launched Production linked Incentive (PLI) scheme to enhance India’s manufacturing capability and exports. The PLI scheme was first introduced in March 2020 and in the Union Budget 2021-22, FM announced an outlay of Rs 1.97 lakh crores for the PLI Schemes for 13 key sectors to make domestic manufacturing globally competitive and to create global champions in manufacturing along with generating employment opportunities for the country’s youth. The PLI scheme is expected to result in a minimum production worth more than $500 billion in five years according to Ministry of Commerce and Industry. So, let’s get an insight into what is PLI scheme, which are the sectors covered and why it is needed?

What is PLI scheme?

The scheme will give incentives to companies for enhancing their domestic manufacturing and also focus on reducing import bills and improving the cost competitiveness of domestic goods. India’s PLI scheme resembles the ‘piece rate’ method which dates back to an era when it was common for producers to make only one product off an assembly line, teams and companies were incentivized to raise output. As manufacturing grew more complex, incentives grew in complexity as well, and gradually focus was on productivity and quality rather than quantity. PLI scheme is very simple and subject to condition that are specific and easy to calculate. The incentive is 4-6% of incremental sales with a defined base year. The PLI scheme is designed with four objectives: 1) Aim specific product areas; 2) Introduce non-tariff measures in order to compete more effectively with cheap imports; 3) Blend domestic and export sales to make manufacturing competitive and sustainable; and 4) promote manufacturing on home front while encouraging investment from within and outside India. As large-scale manufacturing also calls for huge manpower, this scheme will also help to generate employment opportunities.  

Which sectors are covered under PLI scheme till date?

The first three PLI schemes were approved in March 2020 for mobile manufacturing and specified electronic components, drug intermediaries and active pharmaceutical ingredients (APIs) and manufacturing of medical devices with the total financial outlay of Rs 51,311 crore. Another 10 new schemes were launched in November 2020 including electronic and technology products, pharmaceuticals drugs, telecom and networking products, food products, white goods (ACs & LED), High-Efficiency Solar PV Modules, automobiles and auto components, textile products, speciality steel and advance chemistry cell battery with the total financial outlay of Rs 1,45,980 crore. These PLI schemes will be approved by the concerned ministries/departments and will be within the overall financial limits prescribed.  

PLI scheme for different sectors and approved financial outlays

Source : pib.gov.in

Along with reforms and stimulus measures announced by the government to revive the economy from the covid-19 crisis, PLI scheme is one of key initiatives. The scheme will help to make Indian manufacturers globally competitive, attract investment in the areas of core competency and cutting-edge technology. It will also create economies of scale, boost exports and also make India self-reliant in terms of goods, technology and raw materials.