NEW DELHI: The government is undertaking a revamp of the production linked incentives (PLIs), by relaxing the norms for release of funds, adding more sectors under the scheme’s ambit, and extending the benefits to MSMEs in many labour-intensive sectors via special carve-outs. The restructuring would also include incentives for research & development (R&D) for creating a manufacturing ecosystem, even as the total Budget for the scheme would not be stretched, official sources said.
While scheme was launched over three years ago and as many as 14 sectors are covered, only around 5% of the funds earmarked have so far been disbursed. According to the sources, the government has just started accepting applications for release of incentives on a quarterly basis, compared to the earlier norm of annual releases of the funds.
“In many departments we have started (accepting quarterly applications) ..we are telling others to follow the line,” a senior official said.
The new new areas to be covered under the scheme soon are toys, furniture and apparel. These sectors have been identified for their job-creation potential and being driven by micro, small and medium enterprises (MSMEs). The sources said these PLI proposals are “at various stages” but are likely to be “go through” in the next few days.
Similarly, the government could expand the ambit of the PLI scheme for man-made fibre (MMF) and technical textiles to cover certain cotton-based apparel also. While the current PLI scheme is more suitable for large firms with higher capital outlays, inclusion of apparel would benefit the MSMEs in the sector.
Announcements in this regard is expected in the coming Budget.
Only exceptions to quarterly disbursements will be cases where the numbers are small and departments will find it difficult to do so, the sources added. PLI for food processing is one such scheme.
Earlier the scheme guidelines stated that applications for incentives can be submitted after the end of the financial year to which the claim pertains. Annual claims can be submitted only once and within nine months of the end of the financial year.
Total outlay for PLI scheme is Rs 1.97 trillion of which only Rs 9700 crore has been disbursed till March 2024. In FY 24 Rs 6,800 crore of incentives were given across various sectors.
Trade policy think tank Global Trade Research Initiative says that currently firms must meet multiple criteria like investments, production, localisation, sales and input types to qualify for incentives. Many firms that have started production struggle to meet this criteria to miss out on incentives so a review is required.
It is hoped that quarterly disbursements will speed up payout of incentives because claims are expected to increase this year. The reason for higher claims would be the production starting or increasing in manufacturing units that have qualified for PLI.
Till December 2023 around Rs 1.07 trillion has been invested by PLI companies. The investments have generated incremental sales of over Rs 9 trillion and creation of 0.7 million jobs.
The PLI scheme was first launched in March 2020 for three products – raw material for pharma industry, medical devices and large scale electronics manufacturing. In November 2020, 10 more sectors were included in it. In September 2021 PLI for drones were added to the list. More sectors have sought inclusion in the scheme including toys and leather and footwear.
Even though the government has managed to significantly bring down imports of toys with various measures, its attempts to boost their exports haven’t succeeded yet. India’s toy imports decreased drastically to $64.9 million in FY24 from $304.1 million in 2018-19. However, exports saw a modest increase to $152.34 million in the previous fiscal from $129.6 million in FY20.
In the extant textiles PLI, selected 64 applicants have cumulatively invested Rs 3,317 crore or 17% of their proposed investment of Rs 19,798 crore, reflecting poor take-off. Investments were to happen during 2022-23 and 2023-24 and the in. The incentive was to be provided from the allocated Rs 10,683 crore over five years to the companies under the scheme on achieving the threshold investment and threshold turnover and thereafter incremental turnover.
Furniture industry in India is also dominated by MSMEs. In order to scale up the production and exports, the Centre may extend the PLI scheme to certain wooden furniture.
Companies have invested around Rs 1.07 trillion in two years through December 2023 under the 14 PLIs, or about 40% of the Rs 3 trillion committed. However, the trend is barely par for the course, with big lags in investments in many sectors such as high-efficiency solar PV modules, automobiles, ACC batteries and textiles that were supposed to lead the pack. The government is reviewing the schemes to reopen some of the schemes and replace some of the schemes with new ones.
Source: The Financial Express
