Production Linked Incentive Scheme

 

Production Linked Incentive Scheme (PLI)

 

Production linked incentive (PLI) schemes were first introduced in India in March 2020, targeting three sectors. The PLI concept has since expanded with schemes rolled out for multiple sectors to make India self-sufficient in manufacturing products and to cater to both domestic and international markets.

In other words, the PLI schemes aim to position India as a global manufacturing hub by improving the local supply chain, developing key downstream operations, and incentivizing investments in high-tech production.

The PLI schemes cover 13 sectors like pharmaceuticals, mobile phones, specialty steel, auto components, technical textiles, manufacturing of medical devices, IT Hardware, white goods, High-efficiency solar PV modules, Telecom and networking products, Food Products, ACC battery, etc., with a total budgeted outlay of INR 1970 billion (US$26.48 billion). Each PLI scheme is applicable for a four to six-year duration period, depending on the sector.

How do the production-linked incentive schemes work?

The PLI framework enables India to take definitive steps, in the near term, to expand the manufacturing potential of the economy. The pillars of the policy are: 

• Creation of large-scale manufacturing capacity: Since the incentives are directly proportional to production capacity/ incremental turnover, it is expected that investors will be compelled to create large-scale manufacturing facilities. Furthermore, it is also expected to bring improvements in industrial infrastructure, benefiting the overall supply chain ecosystem.

 

• Import substitution and increase in exports: PLI schemes intend to plug the gap between the highly skewed Indian import-export basket, which is mainly characterized by heavy imports of raw materials and finished goods. The PLI schemes are intended to enable domestic manufacture of goods, thereby causing a reduction in reliance on imports in the short term and expanding the quantum of exports from India over the long term.

 

• Employment generation: As large-scale manufacturing requires a large labor force, it is expected that the PLI schemes will utilize India’s abundant human capital and enable upskilling and technical education.

Implementation of the schemes

 

The PLI schemes provide eligible manufacturing companies incentives ranging from four to six percent on incremental sales over the base year of 2019-20 for a four to six-year period. It is like a subsidy being provided by direct payment – as budgeted – for domestically manufactured goods by the chosen beneficiaries.

Which sectors are covered under India’s PLI schemes?

There are 13 sector beneficiaries of the PLI schemes. They are as follows:

• Automobiles and auto components: India’s federal government has approved the PLI scheme for automobile and auto components with a budgetary outlay of INR 259.38 billion (US$3.50 billion) to boost domestic manufacturing capacity, including the production of electric and hydrogen fuel cell vehicles. The main implementing agencies for the scheme are the Ministry of Heavy Industries and Public Enterprises.

Top Automobile manufacture in India-

·       Ashok Leyland (1948–present)

·       Bajaj Auto (1945–present)

·       Eicher Motors (1948–present)

·       Force Motors (1958–present)

·       Hindustan Motors (1942–present)

·       Hradyesh (2011–present)

·       ICML (2003–present)

·       Kerala Automobiles Limited (1984–present)

·       Mahindra & Mahindra (1945–present)

o   Reva (1994–present)

·       Pravaig Dynamics (2011–present)

·       Premier (1944–present)

·       Tara International (1978–present)

·       Tata Motors (1945–present)

·       Vehicle Factory Jabalpur (1969–present)

 

Foreign manufacturers building, or in a joint venture, in India

·       BMW India (2006–present)

o   Mini India (2013–-present)

·       Citroën India (2021–present)

·       Honda Cars India (1995–present)

·       Hyundai Motor India (1996–present)

o   Kia India (2017–present)

·       Isuzu Motors India (2012–present)

·       Jaguar Land Rover India (2008–present)

·       FCA India Automobiles (2012–present)

o   Jeep India (2016–present)

·       Maruti Suzuki (1981–present)

·       Mercedes-Benz India (1994–present)

·       MG Motor India (2017–present)

·       Nissan Motor India (2005–present)

o   Datsun India (2014-present)

·       Renault India (2005–present)

·       Toyota Kirloskar Motor (1997–present)

o   Lexus India (2020–present)

·       Volkswagen India (2007–present)

o   Audi India (2007–present)

o   Porsche India (2004–present)

o   Škoda India (2001–present)

Top Automobile Components manufacture in India-

·     Motherson Sumi System Ltd

·     Sundram Clayton Ltd

·     Varroc Engineering Ltd

·     Bosch Ltd

·     Endurance Technologies Ltd

·     Minda Industries Ltd

·     Wabco India Ltd

·     GNA Axles

·     Pricol

·     Rane Brake

·     Rajratan Global

·     Enkei Wheels

·     Frontier Spring

·     Kinetic Engineering Ltd

·     SAL Automotive Ltd

• Drones and drone components: Under the PLI Scheme for drones and drone components, the government has liberalized the minimum value addition criteria to 40 percent of net sales for drones and drone components. The budget of the scheme is INR 1.2 billion (US$16.13 million). The main implementing agency for the scheme is the Ministry of Civil Aviation.

 

• Advanced chemical cell (ACC) batteries: An outlay of INR 181 billion (US$2.43 billion) has been earmarked by the government towards the scheme, which is intended to establish a local manufacturing capacity of 50 Giga Watt Hour (GWh) of ACC and five GWh of Niche ACC capacity. The main implementing agencies for the scheme are the Department of Heavy Industries and NITI Aayog. This scheme is also in sync with India’s objective of accelerating EV adoption over the coming decade, while also reducing the dependence on imports. The scheme is mainly targeted at large players.

Top Battery manufacturing company in India-

·     Excide Industries Ltd

·     Amara Raja Batteries Ltd

·     Eveready India Industries Ltd

·     HBL Power System Ltd

·     Indo National Ltd

·     Panasonic Energy India Company Ltd

·     High Energy Batteries (India) Ltd

·     Goldstar Power Ltd

• Electronics systems and technology: The implementing agency for this scheme is the Ministry of Electronics and Information Technology. It includes products like mobile phones, specified electronic components, laptops, tablets, all-in-one PCs, servers, etc.

• Electronics manufacturing: The budget outlay for this scheme is INR 400 billion (US$5.38 billion).
• IT hardware: The budget outlay for this scheme is INR 73.25 billion (US$984.68 million).

 

• Food processing: Approved with an outlay of INR 109 billion (US$1.47 billion), the main implementing agency of this scheme is the Ministry of Food Processing. The ensuing benefits from the PLI scheme in this sector are expected to trickle down further to the farmers and help harness the massive employment generation potential in the sector. Products like ready to eat / ready to cook, marine products, fruits and vegetables, honey, desi ghee, mozzarella cheese, organic eggs, and poultry meat, etc. will be included.

 

• Medical devices: The Indian Government has identified medical devices as a priority sector for the flagship ‘Make in India’ program and is committed to strengthening the manufacturing ecosystem. The PLI phase one of this scheme has been completed and phase two has been announced. The eligible medical device segments under this scheme include

• Cancer care/radiotherapy: Brachytherapy systems, rotational cobalt machine, radiotherapy simulation systems, linear accelerator (linac), proton therapy system, etc.
• Radiology, imaging, and nuclear imaging devices: CT-Scan, MRI, ultrasonography, X-ray equipment, mammography, C-arm, Cath-Lab, positron emission tomography (PET) Systems, single-photon emission tomography (SPECT), cyclotrons, etc.
• Anesthetics, cardio-respiratory, and renal care: Needles-anesthesia, syringes-anesthesia, anesthesia workstation, anesthesia unit gas scavengers, anesthesia kits, masks —anesthesia, anesthesia unit vaporizers, anesthesia unit ventilators, automated external defibrillators (AEDs), dialyzer, dialysis machine, peritoneal dialysis kits, etc.
• All implants: Cochlear implants, hip implants, knee implants, spinal and neuro-surgical implants, urogynaecology surgical mesh implants, hernia surgical mesh implants, cerebral spinal fluid (CSF) shunt systems, implanted pacemakers, insulin pump, implanted neuro-stimulated devices like deep brain stimulator, intraocular lenses, heart valves, stents, etc.

 

• Specialty steel: Approved with an outlay of INR 63.22 billion (US$849.85 million), the main implementing agency of this scheme will be the Ministry of Steel. This scheme will be implemented for five years, from FY 2022-23, with the incentive to be released from FY 2023-24. The initial year may be delayed by up to two years in the case of specific product categories. The release of the incentive will be from FY 2023-24 to 2027-28 (FY 2025-26 to FY 2029-30 in case of deferment by two years). The five categories of specialty steel that have been selected in the PLI scheme are coated/plated steel products, high strength/wear-resistant steel, specialty rails, alloy steel products, and steel wires and electrical steel. Guidelines were released in November 2021 and the ministry has opened the window for applications.

 

• Pharmaceuticals: The Indian pharmaceuticals market is supported by the following PLI schemes to boost domestic manufacturing capacity, including high-value products across the global supply chain. The implementing agency for these schemes is the Department of Pharmaceuticals.

• PLI scheme for Key Starting Materials (KSM)/Drug Intermediates (DIs) and Active Pharmaceutical Ingredients (APIs) (PLI 1.0)
• PLI scheme for pharmaceuticals d (PLI 2.0)

 

• White goods: Total incentives applicable under the PLI scheme for white goods (Air Conditioners and LED Lights) will cost the government INR 62.38 billion (US$831.27 million). The target segments under air conditioners are:

• Air conditioners (components – high-value intermediates or low-value intermediates or sub-assemblies or a combination thereof)
• High-value intermediates (copper tubes, aluminum foil, and compressors)
• Low-value intermediates (PCB assembly for controllers, BLDC motors, service valves, and cross-flow fans for AC and other components.

The target segments under LED include:

• LED lighting products (core components like LED chip packaging, registers, ICs, fuses, and large-scale investments in other components.
• Components of LED lighting products (like LED chips, LED drivers, LED engines, mechanicals, packaging, modules, wire wound inductors, and other components.

• Solar photovoltaic (PV) modules: Total incentives for eligible investors in the production of solar modules will cost the government INR 45 billion (approx. US$599.99 million) under the PLI scheme.

 

• Telecom and networking products: Approved with an outlay of INR 121.95 billion (US$1.64 billion), the main implementing agency of this scheme will be the Department of Telecommunications. Recognizing the need for additional support to MSME units allows them additional incentives in the initial years. This scheme would aid the ongoing focus on digital transformation. The list of specifies target products include core transmission equipment, 4g/5g, next-generation radio access network and wireless equipment, access & customer premises equipment (CPE), internet of things (IoT) access devices and other wireless equipment, enterprise equipment: switches and other products as may be decided by an empowered group of secretaries.

 

• apparel: Approved with an outlay of INR 106.83 billion (US$1.44 billion), the main implementing agency of this scheme will be the Ministry of Textiles. This scheme intends to shift the textile production from natural fibers to man-made fibers and technical textiles, aligning with global consumption patterns. The product segments under this sector will include man-made fiber segments as well as technical textiles.