The Cabinet gave in principle approval to Production-Linked Incentives worth ₹1.45 lakh crore for 10 sectors including white goods, automobiles, pharmaceuticals and textiles, seeking to attract big-ticket investment. Of this, the most is for automobiles and auto components at ₹57,042 crore, followed by battery manufacturing at ₹18,100 crore, in order to boost electric vehicle manufacturing. The incentives are in the form of a percentage of incremental sales linked to certain minimum investment and incremental sales milestones.
“Cabinet decision of PLI scheme for 10 sectors will boost manufacturing, give opportunities to youth while making India a preferred investment destination,” PM Narendra Modi tweeted. “This is an important step towards improving our competitiveness & realising an Aatmanirbhar Bharat.”
Niti Aayog chief executive officer Amitabh Kant said that the think tank will prepare notes for sector specific schemes for the Expenditure Finance Committee and thereafter take them to Cabinet over the next 45 days.
Under the scheme, cash subsidy is provided to companies as a percentage of incremental sales from the base year, which is the year the scheme comes into effect from. Percentage of incentive is worked out in accordance with the disadvantage faced by the sector and varies sector to sector.
The PLI scheme is already operational for mobile phone manufacturing, active pharmaceutical ingredients and medical devices with an outlay of ₹51,000 crore. The latest announcement will take the total amount of incentives under the PLI programme to nearly ₹2 lakh crore. In the case of mobiles, the starting incentive rate is 6%, going down to 4% in the fifth and final year.
“Aatmanirbhar is not inward looking,” said finance minister Nirmala Sitharaman, while announcing the scheme’s extension. “The policy that we are taking in the PLI, through which we want the manufacturers to come into India, is clearly to say we want to build our strength but yet link with the global value chains.” Aatmanirbhar Bharat Abhiyan is aimed at building a self-reliant economy.
She said critical sunrise sectors, those that can be part of global value chains and are labour intensive, have been selected for support.
The scheme “will make Indian manufacturers globally competitive, attract investment in the areas of core competency and cutting-edge technology; ensure efficiencies; create economies of scale; enhance exports and make India an integral part of the global supply chain,” the government said in a statement.
Under the scheme, ₹15,000 crore has been earmarked for pharmaceuticals and ₹12,195 crore for telecom and networking products. Other sectors covered are textiles (₹10,800 crore), food (₹10,900 crore), high efficiency solar PV modules (₹4,500 crore), specialty steel (₹6,322 crore), air conditioners and LEDs (₹6,238 crore), and electronic/technology products (₹5,000 crore).
Details of the scheme will be worked out by the respective ministries and departments. These will then be sent to the Cabinet for approval.
The government has not fixed a cap on the number of companies that can apply for incentives, Sitharaman said. Savings, if any, from one approved sector can be utilised to fund another approved sector by the empowered group of secretaries. Any new sector for PLI will require fresh Cabinet approval.
The PLI programme is part of the government’s plan to make India an attractive manufacturing destination and promote self-reliance besides helping the country emerge as a viable alternative to China. Other elements of this strategy include the reduction in corporate tax rate to 25% and the phased manufacturing plan, aimed at increased indigenisation.
The government has identified 24 focus sectors as part of its manufacturing push via the PLI and PMP schemes. These include footwear, ceramics and glass, ethanol, ready-to-eat food, aluminium, gym equipment, toys and sporting goods, drones, robotics and electric vehicle equipment. Of these, a few sectors have been identified as priorities with potential for domestic manufacturing and import substitution through import restrictions and quality control orders such as toys and footwear.