Production Linked Incentive (PLI) Schemes in India
production-linked incentive (PLI) scheme was announced by the national
government in March 2020 to make India a competitive player in global markets
and to increase domestic manufacturing and exports. The PLI scheme aims to
incentivize enterprises to sell more products created in domestic facilities. The
initiative encourages international corporations to establish units in India,
but it also attempts to encourage domestic enterprises to establish or expand
existing manufacturing facilities, so creating more jobs and reducing the
country's dependency on imports.
The government is
concentrating on increasing the rate of investment in industry and providing
performance-based incentives. The general concept of the PLI, as well as the
macro-level aims pursued by the government, must be understood in this
perspective. It will be fascinating to examine how these industries have fared
in terms of investment, sales, and employment in order to meet the challenges
that lie ahead for businesses when utilizing the government incentives.
What exactly is the PLI scheme?
The strategy was
created for a few select industries in FY2019–20, including the manufacturing
of mobile phones and related equipment, pharmaceutical ingredients, and medical
devices. This was implemented with a budget of Rs. 51,311 crore (US$ 7,089
million) split over five years by the Ministry of Electronics and Information
Technology (MEITY) and the Department of Pharmaceuticals. The initiative benefited
150 industrial units in FY2020, generating increased revenues of Rs. 46,400
crore (US$ 6,187 million) and demonstrating tremendous job potential over the
next eight years.
As a result, the
initiative has been expanded to include an extra ten 'sunrise' industries in
order to strengthen the economy and India's self-sufficiency. Nirmala
Sitaraman, the finance minister, unveiled the plan during the Atma Nirbhar 3.0
stimulus package for fiscal year 2020-21, with an estimated allocation of Rs.
1,45,980 crore (US$ 20,169 million) spread across five years. The following
industries are included in the new scheme:
The PLI Scheme's main goals are to:
selected product areas
non-tariff measures that increase the cost of imports
• Recognize the
importance of exports in the overall growth strategy, while refocusing on the
domestic manufacturing by providing incentives for production and encouraging
• Attract core
expertise and cutting-edge technology
efficiencies by using economies of scale.
• Promote the
establishment of new jobs and employment opportunities.
export centers at the district level
• Lessen the
burden of compliance
• Make it easier
to do business
• Lower logistical
• In five years,
increase local manufacturing production by Rs 3,763,150 (US$ 520 billion).
ACC Battery (Advanced Chemistry Cell)
global growth industries such as consumer electronics, electric cars, and
renewable energy, ACC battery manufacturing represents one of the major
economic opportunities in the twenty-first century. Large domestic and foreign
players are likely to be enticed to create a competitive battery set-up in the
country by the PLI plan for ACC batteries. The battery strategy of the scheme
is to make producers more globally competitive, increase exports, create
economies of scale, and develop cutting-edge products.
The ACC sector's
overall financial spend is Rs. 18,100 crore (US$ 2,501 million). The NITI Aayog
and the Department of Heavy Industries would be in charge of this sector.
In the following
four years, the initiative is estimated to generate production and exports
totaling Rs. 326,000 crore (US$ 45,048 million) and Rs. 245,000 crore (US$
33,855 million). In four years, it is expected to bring in additional
investments worth Rs. 2,700 crore (US$ 373 million), generate Rs. 15,760 crore
(US$ 2,178 million) in direct and indirect revenue, and create 1, 80,000
employment. Furthermore, the government's push for data localization, the
Internet of Things market, and programs like Smart City and Digital India are
likely to boost electronic goods demand.
Technology and Electronics Products
electrical product production will be improved as a result of the PLI scheme. Semiconductor
fabs, display fabs, laptops, digital notebooks, servers, IoT devices, and
computer hardware components are among the permitted product lines for this
sector. The plan includes production-related incentives to stimulate domestic
manufacture and attract substantial investments throughout the IT hardware
value chain. Eligible enterprises will get 1-4 percent incentives on net
incremental sales of manufactured items under the scheme. This sector will be
overseen by the Ministry of Electronics and Information Technology (MEITY). The
electronics sector has a total budget of Rs. 5,000 crore (US$ 691 million).
such as Apple's contract manufacturers Foxconn, Wistrom, and Pegatron; Samsung;
and local players such as Lava, Optiemus, and Dixon - committed more over Rs.
11,000 crore (US$ 1,520 million) in the first round of applications for the
Automobiles and Automobile Parts
The PLI scheme
for this industry will be overseen by the Department of Heavy Industries and
Public Enterprises, in collaboration with the Ministry of Commerce. Instead of
just total revenue from items sent in a particular year, they propose to offer
standard operating procedures based on incremental increases in export revenue
from the base year. In addition, the ministries intend to change the base year
for calculating incentives from FY20 to FY19. The automobile sector has
received a total of Rs. 57,042 crore (US$ 7,882 million) in financial
in five-year term, the PLI scheme is estimated to rise over Rs. 100,000
crore (US$ 13,819 million) and create another 5,884,000 employment
opportunities. In India, the automobile sector is a significant economic contributor.
The PLI plan is expected to increase the competitiveness of the Indian
automobile industry and its globalization.
Drugs manufactured by pharmaceutical companies
pharmaceuticals scheme is meant to boost high-value product manufacture in the
country and increase value addition in exports. The Department of
Pharmaceuticals will be in charge of this sector's scheme. A total of Rs.
15,000 crore (US$ 2,073 million) in financial incentives has been granted to
the sector. India currently sells pharmaceuticals to 200 nations throughout the
world, but imports high-value patented medications for domestic use. The
initiative intends to make India's pharmaceutical industry more globally
competitive by lowering import costs.
domestic players will be enticed to engage in high-value production under the
PLI scheme. Pharma exports are expected to be worth Rs. 200,000 crore (US$ 35
billion) over the next five years. The Indian pharmaceutical sector is the worlds
third-largest by volume and the 14th-largest by value. It exports 3.5 percent
of all medications and medicines in the world. India has a robust ecosystem of
affiliated industries and a complete ecology for developing and manufacturing
Telecom and Networking products
The plan aims to
offset telecom equipment imports as well as the ‘Make in India' drive for
telecom items in the domestic market. India currently imports
telecommunications and network equipment worth Rs 50,000 crore (US$ 6,909
million) per year. To address this concern, the Union Cabinet has sanctioned a
maximum financial outlay of Rs. 12,195 crore (US$ 1,685 million) for domestic
and overseas firms to receive production-linked incentives.
The Department of
Telecom will be in charge of this sector. In the next five years, the scheme is
expected to attract Rs. 3,000 crore (US$ 415 million) in investments, Rs.
244,200 crore (US$ 33,745 million) in incremental production, Rs. 1,95,360
crore (US$ 26,996 million) in goods exports, Rs. 17,000 crore in tax revenue,
and 40,000 additional direct and indirect employment.
Textile products (Man-made Fibres and
The PLI plan for
the textile industry is designed to provide the most financial benefits to
enterprises looking to enter the textile industry. Eligible enterprises can
receive up to 11% in monetary incentives for increasing production and
employment in this industry, the highest of the ten sectors.
To be eligible
for the scheme, new entrants must invest at least Rs. 500 crore (US$ 70
million) according to the criteria. For existing enterprises in the industry
with a turnover of between Rs. 100 crore and Rs. 500 crore (US$ 14-70 million),
the incentive rate is restricted at 9% of incremental production in the first
year. Over the course of five years, the incentive would be gradually reduced
Companies with a
turnover of more than Rs. 500 crore (US$ 70 million) would be eligible for a 7%
incentive, which would gradually decrease to 3% over five years. The Union
Cabinet has allocated a maximum of Rs. 10,683 crore (US$ 1,476 million) in
financial incentives for this sector. In these two textile areas – man-made
fibres and technological fibres – the strategy intends to build 50-60 globally
competitive champion enterprises.
textile sector is one of the world's largest, accounting for 5% of worldwide
textile and garment exports, worth Rs. 673 crore (US$ 93 million). The PLI
scheme will attract massive investments in the sector, particularly in the MMF
segment and technical textiles, in order to drive domestic manufacture. The
Ministry of Textiles will implement the strategy for this industry.
The Ministry of
Food Processing Industry will adopt the PLI plan for the food processing
industry. The goal is to improve industrial capabilities, boost exports, and
introduce food processing facilities to rural and semi-rural areas. The
government plans to help 2 lakh people upgrade their businesses as part of this
scheme, with the goal of integrating micro-food processing businesses into the
incentives worth Rs. 10,900 crore (US$ 1,506 million) have been set aside for
this sector. PLI schemes have been identified for supporting specific product
lines with strong growth potential and the ability to generate medium to
Solar PV Modules with High Efficiency
Under the scheme,
the government of India plans to invest Rs. 4500 crore (US$ 622 million) in the
manufacturing of solar PV modules. The Ministry of New and Renewable Energy (MNRE)
will be in charge of the PLI for the solar sector.
manufacturers are projected to invest Rs. 14,000 crore (US$ 1,935 million)
under the scheme for the solar sector. The project, which aims to build 100 GW
of solar PV manufacturing capacity in the next two years, would also boost
demand for locally made components including ethylene vinyl acetate (EVA)
sheets, solar glass, back sheet, and junction boxes, which will total Rs.
17,500 crore (US$ 2,418 million). This will contribute to the growth and expansion
of the solar PV manufacturing ecosystem.
The scheme is
expected to employ 3,000 people directly in solar panel manufacturing and
120,000 people indirectly in ancillary and associated industrial activities,
packaging, shipping, and other services.
White Goods (ACs and LEDs)
for Promotion of Industry and Internal Trade officially began the PLI plan for
air conditioners and LED lights on April 1, 2020, with a value of Rs. 6,238
crore (US$ 862 million) (DPIIT).
The initiative is
expected to generate production of Rs. 17,000 crore (US$ 2,349 million) over
the following five years. This would also result in an increase in exports of
Rs 64,400 crore (US$ 8,899 million) and the creation of over 100,000
employment. The initiative aims to collect Rs. 11,300 crore (US$ 1,562 million)
in direct tax revenue and Rs. 38,000 crore (US$ 5,251 million) in goods and
services tax revenue. In addition, qualified enterprises will get a 4-6 percent
incentive on incremental sales for goods manufactured in India and covered by
the target segments over the base year FY19-20.
Steel Specialty Products
Steel is a
crucial industry for India, which is the world's second-largest manufacturer. A
PLI plan for specialty steel will aid in the development of production
capacities for value-added steel, resulting in increased total exports.
The Ministry of
Steel will be in charge of this sector. The automobile sector has a total
budget of Rs. 6,322 crore (US$ 874 million). The inclusion of the sector in the
PLI scheme will boost investments, increase production, create jobs, and make
technology upgrades easier.
ministry has proposed a three-tiered incentive structure of 3%, 6%, and 9%. The
PLI for each corporation will be limited to Rs. 200 crore (US$ 27.6 million).
Steel kinds that are often utilised in the building, power, and agriculture
industries are proposed for a 3% incentive. Color-coated steel,
aluminum-zinc-coated steel, and heat-treated HR steel are among them. For tin
mill-coated metal goods and electro galvanized steel, a 6% incentive is
proposed. The 9% incentive will be targeted at domestic steel production of
steel grades that are now imported.
According to a
press release published by Prime Minister Narendra Modi, the PLI scheme is
expected to improve India's manufacturing output by Rs. 3,770,000 crore (US$
520 billion) during the next five years.
The plan has been
designed so that the government only pays incentives once the investment has
been made, jobs have been created, and production and sales targets have been
met. Furthermore, the initiative provides greater incentives to the MSME
sector, which is likely to stimulate domestic manufacturing and strengthen
supply chains throughout the country.
contributed for only 15.1 percent of India's gross value added (GVA) in
FY2019-20, compared to 17.4 percent in FY2011-12, according to National
Accounts Statistics. Despite considerable growth in private consumption in the
country, the share of the market has shrunk. India's manufacturing sector's
slowness has resulted in a strong reliance on imports and a big trade deficit.
India had a trade
deficit in five of the ten PLI sectors — ACC battery production, electronics,
medical equipment, solar PV manufacturing, and white goods – India had a trade
deficit. PLI initiatives will enable firms move up the value chain and lead to
increasing value-added exports from India in the remaining five sectors where
India has an overall trade surplus.
From a balance of
trade standpoint, the ten sectors considered for this strategy indicate
enormous untapped potential. According to India Exim Bank Research, cumulative
exports from 10 PLI sectors reached Rs. 521,000 (US$ 71.9 billion) in
FY2019-20, with the potential to boost India's exports by Rs. 398,000 crore
(US$ 55 billion) in FY2020-21.