Govt in trouble over PLI scheme expansion to new sectors

There is a growing demand from the industry to expand the ₹1.97 lakh crore Production Incentive Scheme (PLI) in the next fiscal to include new sectors and products. However, the government is in a dilemma whether to expand the scope of the scheme immediately or focus on successfully completing schemes in the existing 14 sectors.

“The industry has been demanding the extension of the PLI scheme to their sectors. Consultations are on. However, we cannot announce anything until things are finalised at all levels. Our focus is on the successful completion of the scheme in the 14 existing sectors. Let’s see how things pan out and if any budget is announced,” said a senior government official. business line.

Sectors in focus

The new sectors and products that the industry is interested in include many labour-intensive items such as toys, footwear and leather, electronic components, jewellery, handicrafts, clothing made from various materials and shipping containers.

“To create more employment opportunities in the country, we expect the upcoming budget to not only extend the PLI scheme to existing sectors but also extend its scope to sectors like chemicals and services, leather, apparel, jewellery and other consumer goods where India needs to increase its export share,” said Sanjeev Agarwal, president, PHDCCI.

Interestingly, despite a token provision in the interim budget announced on February 1 for PLI in the toys and leather and footwear sectors, no decision in this regard has been announced so far.

In 2021, the Centre announced a PLI scheme for 13 sectors (later expanded to include one more) at an outlay of ₹1.97 lakh crore to encourage local manufacturing in strategic areas and encourage exports. Support under the scheme, based on minimum investment and turnover, is to be provided for a period of five years.

The 14 sectors include: Mobile Devices and Specific Electronic Components, Pharmaceutical and API Intermediaries, Medical Devices, Automotive and Components, Pharmaceutical Products, Specialty Steel, Telecom Products, Electronics/Technology Products, White Goods, Food Products, Textiles (MMF and Technical Textiles), High-Performance Photovoltaic Modules, ACC Batteries, and Drones and Components.

So far, the program has proven effective only in a few sectors, primarily mobile device manufacturing, and to some extent in the electronics, food processing and pharmaceutical sectors.

Investments

As per the latest estimates, the PLI scheme has attracted investments worth ₹1.5 lakh crore (total expected investments were ₹3-4 lakh crore), leading to production worth ₹8-9 lakh crore, of which ₹3-3.5 lakh crore was exported, the official said. The total incentive disbursements are around ₹10,000 crore, but they were mostly in a few sectors.

“There are certain sectors like automotive, home appliances and solar modules that are in the development phase and where we may see more momentum in the coming years. There are others like textiles and specialty steel where some tweaking may be needed to make them more attractive to investors,” the official said.

(With contributions from KR Srivats and Abhishek Law)