Indian govt develops Rs 120 bn PLI scheme for heavy machinery in mining, construction

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Indian govt develops Rs 120 bn PLI scheme for heavy machinery in mining, construction

Indian govt develops Rs 120 bn PLI scheme for heavy machinery in mining, construction

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Sep 18,23

Ministry of Heavy Industries is presently soliciting input from the industry regarding the scheme's product scope, implementation strategy, and the extent of incentives it should offer.

Indian govt develops Rs 120 bn PLI scheme for heavy machinery in mining, construction

Two individuals with knowledge of the matter have disclosed that the Indian government is actively developing a Production-Linked Incentive (PLI) scheme valued at Rs 120 billion for heavy machinery used in mining and construction.

These insiders have revealed that the Ministry of Heavy Industries is presently soliciting input from the industry regarding the scheme's product scope, implementation strategy, and the extent of incentives it should offer. While discussions are ongoing, the scheme's size may ultimately fall within the range of Rs 80 billion to Rs 120 billion.

The primary objective of the PLI scheme is to attract investment in the manufacturing of large-scale machinery used in coal and mineral mining, as well as construction. Additionally, it aims to encourage the production of components necessary for these sectors, as a significant portion of these components is currently imported for local manufacturing purposes.

Once the draft scheme is finalised, the Ministry of Heavy Industries plans to seek approval from the Ministries of Commerce and Finance over the next few months. The goal is to make the scheme operational either during the current fiscal year or early in the next fiscal year, following cabinet approval. The incentives under this scheme are expected to be applicable from 2025-26 through the end of 2029-30.

This initiative aligns with the government's 'Atmanirbhar Bharat' (Self-Reliant India) and 'Make in India' campaigns, which were initiated in April 2020 through several PLI schemes. These schemes are designed to enhance the global competitiveness of Indian manufacturers, attract investments, boost exports, reduce reliance on imports, and generate employment. Incentives are provided to companies based on incremental sales of products manufactured within domestic facilities.

The PLI scheme for heavy equipment is anticipated to further support India's infrastructure growth, targeting equipment such as backhoe loaders, excavators, super loaders, blast-hole drills, bucket-wheel excavators, dozers, highway miners, and large mining trucks. While some of these machines are already produced in India in limited quantities, demand is on the rise.

The government's objective is to expand capacity for equipment already being manufactured domestically and establish new capacities for equipment that are either imported as completely built units (CBUs) or assembled locally with a substantial import component. The scheme will also emphasise the development of an ecosystem involving small and medium-sized enterprises for the production of various grades of components required by the sector.

Furthermore, considering the government's emphasis on promoting underground coal mining, specific equipment for this segment may also be included in the planned scheme.

At the time of press, queries directed to the Ministries of Heavy Industries and Coal, as well as NITI Aayog, remained unanswered.

V Vivekanand, President of the Indian Construction Equipment Manufacturers’ Association (ICEMA) and Managing Director of Caterpillar India Pvt Ltd, expressed the industry's commitment to realising the vision of 'Aatmanirbhar Bharat' (Self-Reliant India) by not only enhancing capacity and capability for "Make in India for India" but also for "Make in India for the world."

Industry estimates presented to the government earlier in the year suggest that the PLI scheme for the construction equipment industry could attract $4 billion in domestic and foreign investments in the short term, leading to $2.9 billion in forex savings by 2030 through import substitution. The scheme is also expected to facilitate $3 billion in exports by 2030 and generate an additional 3.2 million jobs.

According to the ICEMA Industry Vision Plan 2030, the market size for construction equipment is projected to reach $25 billion by the end of the decade. ICEMA has urged the government to consider extending a PLI scheme to the sector, given its capital-intensive nature, to enable it to make a substantial contribution to the country's infrastructure development.

Source: Mint