The Government had announced Production Linked Initiative schemes for two sectors namely electronics and pharmaceuticals to attract investments and promote domestic manufacturing. These sectors were identified because of India’s core competency in these segments and their potential for growth and exports.
[You may also read: Impact of COVID on pharmaceutical in India]
The Government has received applications from 22 global and domestic phone makers under the Production Linked Initiative scheme for electronics. These include Samsung, Pegatron, Wistron, Foxconn, Rising Star, Lava, Bhagwati (Micromax), and Dixon technologies. [Pegatron, Wistron, Foxconn are the contract manufacturers for Apple].
What is the Production Linked Initiative scheme for electronics?
Production Linked Initiative scheme for electronics is an incentive scheme (as part of the National Policy on Electronics) for large-scale electronics manufacturing in India aimed at developing a mobile manufacturing ecosystem in the country. The PLI scheme was notified by the Government on 1 April 2020.
The scheme provides a financial incentive to eligible companies to boost domestic manufacturing and attract large investments in the electronics value chain including mobile phones and electronic components.
The financial incentive provided is of 4% to 6% on incremental sales of electronic goods (mostly mobile phones and specified electronic components) manufactured in India over a period of 5 years. The base year for computation of incremental or additional sales and investment is 2019-20.
The incentives are applicable from 1st August 2020 for a period of 5 years.
The total incentives over five years have been kept at Rs 40,951 crore.
Total incentive available to distribute for the first year is capped at Rs 5,334 crore. For the second-year Rs 8,064 have been earmarked, and for the third year incentives are capped at 8,425 crore. This will is hiked for the fourth year to Rs 11,488 crore. In the fifth and final year, 7,640 crore is the amount that will be distributed.
Source: Money control
For a company to be eligible for disbursement of incentive, it must meet certain threshold conditions of incremental investment and incremental sales. (as mentioned in this PLI Gazette Notification.)
This scheme will be implemented through a Nodal Agency which will act as a Project Management Agency (PMA).
Over the next five years, the scheme is expected to lead to total production of worth ₹11.5 lakh crore (exports estimated at Rs.7 lakh crore), and create three lakh direct jobs.
The Government had started inviting applications under the production linked incentive scheme in June. The applications closed on July 31. As mentioned earlier, 22 phone makers have applied. And, as many as 40 companies have filed applications under the mobile components segment. It includes AT&S, Ascent Circuits, Visicon, Walsin, Sahasra, Vitesco and Neolync.
This scheme will help global manufacturers like Apple and Samsung to shift their production out of China and diversify their supply chain. It is estimated that India could constitute around 10 % of Apple’s global production at the end of five years.
[You may also read: Companies to move manufacturing out of China. Will India benefit?]
The new scheme would replace the Merchandise Exports of India Scheme (MEIS), India’s largest export promotion scheme. This scheme was introduced in 2015 by merging five export-related schemes. But, it did not yield the desired results. In fact, the exports remained stagnant. Consider this-
The liability under MEIS ballooned from Rs 20,000 crore to about Rs 45,000 crore in 2019-20, reaching an unsustainable level. However, during the period, the country’s exports remained range-bound. In 2014-15, Indian exports were $310 billion and in 2019-20, the export figure was $313 billion. So, the Finance Ministry has restricted MEIS benefits to just Rs 9,000 crore in FY21 and plans to use the savings for the sector focused PLI scheme, sources said.
Source: SwarajyaMag
The MEIS scheme had wider coverage with no specific focus. The resources freed from terminating this scheme would be transferred to sector-specific PLIs.
The Government has also proposed to expand the scope of the scheme to include more sectors where India has competitive strength including air conditioners and TV sets, leather, chemicals, furniture, tyres and toys
[You may also read: Why India’s textile sector lost out to Bangladesh?]
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Very useful information!! Keep it up
On what the basis incentive 4-6% is given? Is it selling price of each product?
The article is very informative, subject explained very nice, but requires updation. More sectors has been included in the list.