The Production Linked Incentive (PLI) plan for 13 important industries was introduced in the Union Budget 2021–22 to improve India’s manufacturing capacity and exports. The PLI Scheme has been expanded to include the drone sector. With a total investment of Rs 3 trillion, there are now 14 industries covered by the PLI Scheme. The plan is consistent with India’s goal of becoming “Atmanirbhar.”
What is PLI Scheme?
The federal government announced that the program will increase domestic production and reduce import costs. The initiative seeks to provide companies with incentives for increased sales of domestically produced goods.
In addition to inviting foreign companies to set up shop in India, the scheme also seeks to encourage domestic businesses to establish or expand existing manufacturing facilities. The program targets labor-intensive industries in an effort to create new employment for India’s expanding labor force.
Objectives of the PLI Scheme
The scheme’s primary objective is to make indigenous manufacturing globally competitive and to produce global manufacturing champions. India must become more compliant with World Trade Organization (WTO) obligations and non-discriminatory and neutral with regard to domestic sales and exports. Additional objectives of the plan include:
- Protect specific product segments
- Introduce non-tariff measures that increase the cost of imports.
- Recognize the significance of exports to the overall growth strategy, while refocusing on the domestic market.
- Encourage domestic production by offering production incentives and encouraging capital expenditures
- Attract fundamental expertise and cutting-edge technologies
- Create volume economies and ensure efficiencies
- Encourage job creation and employment.
- Develop district-level export nodes
- Reduced administrative burden
- Enhance the convenience of business
- Reduced logistics costs
- Enhance domestic manufacturing production within five years
Incentives Under the PLI Scheme
For a period of five years, the Scheme would offer qualified enterprises an incentive of 4% to 6% on additional sales (beyond the base year) of items made in India and falling within target sectors.
What are the PLI Scheme’s Benefits?
Since the profits on these capital-intensive enterprises take longer to materialize, the government cannot continue to invest in them. Instead, it would welcome major global businesses to set up operations in India. Thus, the program offers a number of advantages:
- Overall output affects the PLI system.
- The benefits’ accessibility raises them even further.
- It supports the anchor investors who are able to manage other investments as well as initiatives, whether they are new or ongoing.
- Beneficiaries of this program also receive tax breaks, exemptions from import and export tariffs, and support in acquiring inexpensive land.
- The advantage of PLI’s affordable product costs is another benefit.
The Government May Extend PLI Coverage to the Chemical and Petrochemical Industries
Finance Minister Nirmala Sitharaman hinted on Thursday that large global investors such as BASF, Adnoc, Rosneft, and Aramco are seeking joint venture partners to invest in India and that the government is open to introducing a production-linked incentive (PLI) scheme for investments in the chemicals and petrochemicals sectors.
Ms. Sitharaman urged the industry to reduce its reliance on imports of chemicals that can be manufactured in India. She also emphasized the need to increase their adoption of newer technologies, with a focus on sustainability and circularity, in order to reap any benefits from potential partnerships with global players.
Issues with the PLI Scheme
Only two or three of the 14 qualifying sectors, according to research, were expected to achieve their first-year PLI plan goals. To comprehend the value provided by businesses that have earned or are anticipated to receive incentives under the system, there is no standard set of metrics.
The analysis indicates that the industries believe further incentives are necessary to make India more enticing than China and Vietnam. To successfully administer the program and increase exports, the firms require more incentives. Lack of a centralized database for tracking growth in the nation. The database will be designed and prepared by a third party, maybe the state-owned IFCI Ltd. or Sidbi, according to the NITI Aayog’s plans.