Production Linked Incentive (PLI) Scheme

The Government of India recently announced that it is to expand the PLI (Production Linked Incentive) scheme to more than ten sectors. This includes food processing, leather, textiles, battery manufacturing. The pharmaceuticals (and medical devices) and electronics are already under the scheme. These sectors were suggested by NITI Aayog. The rest four sectors are to be decided soon.

What is PLI scheme?

The Government of India in March 2020, introduced the PLI scheme to boost domestic manufacturing and cut down import bills. The central government aims to provide incentives to the companies on incremental sales from products manufactured in domestic units.

So far, the scheme was introduced in mobile and pharmaceutical industries as they are labour intensive and likely to create new jobs.

Why is Production Linked Incentive Scheme needed?

The Government of India cannot continue to make investments in the capital intensive sectors as they demand longer time to give their returns. Therefore, the Government is taking alternate route, which is to invite global companies with adequate capital to invest in India. This is being achieved through Production Linked Incentive scheme.

Current Scenario

Currently, under the PLI scheme, 4% to 6% incentive has been planned for electronic companies that manufacture mobile phones and other electronic components such as diodes, transistors, thyristors, capacitors, resistors.

The PLI scheme on drugs focus on active pharmaceutical ingredients. This includes drugs such as Vitamin B1, penicillin , meropenem, aspirin and atorvastatin.

Why focus on Active Pharmaceutical Ingredients?

Despite India’s calls to reduce imports from China, 60% of API of India comes from China.

Electronics industry in India

The other two schemes launched to develop Electronics industry in India are the Scheme for Production of Manufacturing of Electronic components and Semiconductors and Modified Electronics Manufacturing Clusters Scheme. Under the PLI scheme, the GoI recently approved Rs 10.5 crores to establish electronics manufacturing units.

Month: Current Affairs - November, 2020