PLI Schemes

• 11 Apr 2022

For Prelims: NITI Aayog, PLI scheme

For Mains: PLI scheme and its Significance, Issues with the PLI scheme

Why in News?

Recently, the NITI Aayog has commenced work on evolving a set of objective criteria to track value addition by companies which avail financial rewards under Production-Linked Incentive (PLI) schemes.

• The empowered group of secretaries which was instituted in June 2020 was tasked with identifying the bottlenecks in PLI schemes, coordinating between states and companies for faster approvals, evaluating and ensuring quick investments in PLI schemes, and ensuring overall turnaround of projects.
• The group is chaired by the Cabinet Secretary, and has the Chief Executive Officer of NITI Aayog, the secretaries of Department for Promotion of Industry and Internal Trade, Department of Commerce, Department of Revenue, Department of Economic Affairs, and the Secretary of the concerned ministry as its members.

What is the Plan?

• Taking the lead in creating a centralised database to monitor progress in the PLI schemes across sectors, the NITI Aayog plans to rope in an external agency – state-owned IFCI Ltd or SIDBI – to design and prepare the database.
  • This database will capture value addition, actual exports against commitments made, and job creation.
• A dashboard to flag hurdles at the state level will also be created.

What are the Challenges Facing the PLI Scheme?

• No Common Set of Parameters:
  • There were no common set of parameters to understand the value addition by companies that have received or are likely to receive incentives under the PLI scheme.
  • At present, different ministries monitor the value addition of their respective PLI schemes and there is no way to compare two different schemes.
  • Also, there are various deliverables such as the number of jobs created, the rise in exports and quality improvement and there is no centralised database to gauge all these.
• Target for Companies for Incentives too Steep:
  • Departments and ministries which interact with companies operating in their sector also face certain specific issues.
    • For instance, at times, the target for companies to qualify for incentives are too steep.
• Domestic Companies Relied on One or Two Supply Chains:
  • Until last fiscal, only 3-4 companies managed to achieve the incremental sales targets to qualify for the PLI scheme from the fourteen companies that had been approved.
  • Unlike global companies, most domestic companies relied on one or two supply chains which have been severely disrupted and due to no fault of their own, these companies won’t qualify for the incentive.

What is the PLI Scheme?

• About:
  • The PLI scheme was conceived to scale up domestic manufacturing capability, accompanied by higher import substitution and employment generation.
  • The government has set aside Rs 1.97 lakh crore under the PLI schemes for various sectors and an additional allocation of Rs 19,500 crore was made towards PLI for solar PV modules in Budget 2022-23.
  • Launched in March 2020, the scheme initially targeted three industries:
    • Mobile and allied Component Manufacturing
    • Electrical Component Manufacturing and
    • Medical Devices
• Incentives Under the Scheme:
  • The incentives, calculated on the basis of incremental sales, range from as low as 1% for the electronics and technology products to as high as 20% for the manufacturing of critical key starting drugs and certain drug intermediaries.
  • In some sectors such as advanced chemistry cell batteries, textile products and the drone industry, the incentive to be given will be calculated on the basis of sales, performance and local value addition done over the period of five years.
• Sectors for the which PLI Scheme has been Announced:
  • So far, the government has announced PLI schemes for 14 sectors including automobile and auto components, electronics and IT hardware, telecom, pharmaceuticals, solar modules, metals and mining, textiles and apparel, white goods, drones, and advanced chemistry cell batteries.
• Objectives:
  • The Government introduced this scheme to reduce India’s dependence on China and other foreign countries.
  • It supports the labour-intensive sectors and aims to increase the employment ratio in India.
  • This scheme works to reduce down the import bills and boost up domestic production.
    • However, PLI Yojana invites foreign companies to set up their units in India and encourages domestic enterprises to expand their production units.

Source: IE