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PLI scheme: Need for a course correction
Articles- Dec 01,23
The Government of India is reportedly planning to ease some norms for five sectors (textiles, pharmaceuticals, drones, solar and food processing) to help them better utlise the fund under its Production-linked Incentive (PLI) scheme.
The Government of India is reportedly planning to ease some norms for five sectors (textiles, pharmaceuticals, drones, solar and food processing) to help them better utlise the fund under its Production-linked Incentive (PLI) scheme. These five sectors account together for nearly a third of the PLI scheme, which aims at boosting local manufacturing. Review has been triggered due to lower-than-expectation response to the scheme.
The Rs 1.97-trillion PLI scheme was launched in 2020 covering 14 sectors ranging from electronic products to drones. However, less than 5 per cent of PLI funds have been utilised in three years, with most of the budget remaining unused. For example, in 2022-23, the government spent Rs 28.74 billion in incentive payouts under PLI scheme against the Rs 85.04 billion initially allocated in the Union Budget for FY23. There are multiple reasons for this sluggish disbursement of PLI incentives.
The PLI scheme provides incentives to applicants on fulfilling the domestic value addition (DVA) criteria wherein a certain percentage of inputs used in the manufacturing process are to be procured domestically. In some of the sectors, this DVA criteria is set at a high percentage. For instance, in auto and auto components sector, the requirement of at least 50 per cent DVA is a challenge for many as India remains dependent on import of key components like lithium-ion batteries and semiconductor chips.
Expansion criteria required in the policy are stringent, and industries have not been able to accomplish them. For instance, the 25 per cent YoY sales growth criteria specified for the textile sector is too harsh for textiles, which see a steady annual growth of 8 to 9 per cent. Many companies that have applied for the scheme are concerned about their ability to meet the government's requirements due to the lengthy, burdensome, and complex procedure to claim incentives. Such delays effectively reduce the scope of benefits available to the applicants.
Covid 19 had disruptive effect on the global economy, which also impacted the PLI scheme in the initial phase delaying investments, setting up of plants by manufacturers, derailing projected sales/revenue growth targets, etc. Now, with economic activities back to near normal, 2023-24 is likely to witness much higher outgo of funds under PLI scheme. Besides, if five large industries (automotive, advanced chemical cell batteries, specialty steel, solar PV and textiles) perform well, they are expected to invest Rs 2.21 trillion or 80 per cent of the overall estimated PLI capex. Of this, an estimated Rs 1.23 trillion has been committed so far.
One of the sectors that has been witnessing strong growth and investment is cement. Against this backdrop, ASAPP Info Global Group (the publisher of IPF) will be hosting the 14th Cement EXPO on December 14-15, 2023, at Manekshaw Centre in Delhi. The who's who of the Indian cement industry, which will witness addition of 145 MT capacity in the next five years, will be attending the Expo and discuss their investment plans for cement machinery, automation, logistics, material handling, energy efficiency, etc. To exhibit and know more about Cement EXPO, simply scan the QR Code below.
Government of India
textiles
pharmaceuticals
drones
solar
food processing
Production-linked Incentive
PLI scheme
auto and auto components sector
Covid 19
14th Cement EXPO
Cement EXPO
cement machinery
automation
logistics
material handling
energy efficiency
14th Cement EXPO on December 14-15
2023
ASAPP Info Global Group
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