INTRODUCTION
Production linked incentive scheme or PLI scheme is an introductory step taken by the government of India to encourage foreign companies to find a workforce in the country. It can thereby generate employment and also encourages the local and domestic productions to create micro jobs. PLI was first introduced in India in March 2020 by Finance Minister Nirmala Sitharaman and was targeting three industries. The three industries are Pharmaceuticals, Mobile manufacturing and electronic components and medical device manufacturing. This scheme was then expanded to multiple sectors for improving India’s manufacturing capabilities and to encourage export-oriented production. This scheme aided in increasing investment prospects in domestic manufacturing. The scheme has been launched in 14 sectors.
About the scheme
Finance minister Nirmala Sitharaman introduced this scheme in March 2020 in her budget speech and was also mentioned in her 2021-2022 budget speech. An outlay of Rs 1.97 lakh crore was announced for the PLI scheme. This scheme’s purpose is to boost domestic manufacturing under the Atmanirbhar Bharat initiative of the government. This is a strategy used by the government to encourage the production of goods which are considered necessary for social welfare, job creation and taxation. The PLI scheme is expected to boost production worth by $500 billion in five years (according to the commerce ministry). For businesses to augment their output, PLIs are essential financial incentives and these could come in form of lowered import or export duties, tax rebates etc. The sectors under this scheme are labour intensive and are likely to create more jobs for increasing the employable workforce in India. PLI is important as the government cannot always make investments in the capital sectors as they need longer times to start giving returns. Instead, what the government can do is invite global companies with adequate capital and set up capacities in India.
Objectives
The PLI scheme was created with four objectives. The first one is to target specific product areas. The second one is to introduce non-tariff measures in order to compete more efficiently with cheap imports. The third one is blending domestic and export sales to make manufacturing competitive and sustainable and the fourth one is to promote manufacturing at home while encouraging investment from within and outside India. The PLI scheme’s application process is not complicated and is also one of the reasons that it has caught on. The incentive offered are very simple and are tied to conditions which are specific and easy to calculate. The incentive is 4-6 percent of incremental sales with a defined base year.
Production linked incentive scheme ministry
1.Production linked incentive scheme for Promotion of Domestic Manufacturing of critical Key Starting Materials (KSMs)/Drug Intermediates (DIs) and Active Pharmaceutical Ingredients (APIs) is under Department of Pharmaceuticals under Ministry of Chemicals and Fertilizers.
2. Production linked incentive schemes for Large Scale Electronic Manufacturing and IT Hardware for Enhancing India’s Manufacturing Capabilities and Enhancing Exports are under the Ministry of Electronics and Information Technology.
3. Production linked Incentive scheme Promoting Domestic Manufacturing of Medical Devices and Production linked Incentive scheme for Pharmaceuticals are under Department of pharmaceuticals.
4. Production linked incentive scheme for Electronic or Technology products is under the Ministry of Electronics and Information Technology.
5. Production linked incentive scheme for Pharmaceutical Drugs is under Department of Pharmaceuticals.
6. Production linked Incentive scheme in Telecom and Networking products for Enhancing India’s Manufacturing Capabilities and Enhancing exports is under the department of Telecommunications.
7. Production linked incentive scheme in Food Products for Enhancing India’s Manufacturing Capabilities and Enhancing Exports is under Ministry of Food Processing Industries.
8. Production linked Incentive scheme for White Goods is under Department for Promotion of Industry and Internal Trade.
9. Production linked Incentive scheme in High Efficiency Solar PV Modules for Enhancing India’s Manufacturing Capabilities and Enhancing exports is under the Ministry of New and Renewable Energy.
10. Production linked incentive scheme for automobile and auto components is under the Ministry of Heavy Industries and Public Enterprises and products were Automobile and Auto Components.
11. Production linked incentive scheme for advanced Chemistry cell (ACC) Battery Storage is under the department of Heavy Industries.
12. Production linked Incentive scheme in Textiles Products for Enhancing India’s Manufacturing Capabilities and Enhancing exports is under Ministry of Textiles.
13. Production linked Incentive scheme in Specialty Steel for Enhancing India’s Manufacturing Application is under Ministry of steel.
14. Production linked incentive scheme for drones and drone components is under the Ministry of Civil Aviation.
Eligibility criteria to avail benefits.
Depending on the industries approved there are different eligibility requirements for businesses under the PLI scheme. In telecom, the eligibility is dependent on achieving the point of absolute investment growth as well as manufacturing sales. In the Ministry of food processing, SMEs are chosen based on their proposal, the novelties of their products and also the level of their product development. In businesses relating to pharmaceutical operations, the company’s net worth must not be less than 30 percentage of its total investments. The DVA or Domestic Value Addition needs to be at least 90 percent for fermentation-based goods. For synthesis-based products, the DVA should be nearly 70 percentage. The eligibility parameters are different in different sectors. For instance, the eligibility criteria in the automobile sector will be different from the electronics sector.
Incentives under the scheme
- In mobile manufacturing and specified electronic components, the scheme shall extend an incentive of 4% to 6% on incremental sales of goods manufactured in India for five years.
- In manufacturing of medical devices an incentive of 5 % for five years.
- In Critical key starting materials/drug intermediaries and active pharmaceutical ingredients an incentive of 5% – 20 % for six years.
- In white goods an incentive of 4% to 6% for five years.
- In telecom and networking products 4% – 7% incentives for five years.
- In Electronic/ technological products an incentive of 1% to 4% for four years.
- In pharmaceutical drugs an incentive of 3% to 10% for six years.
- In food products an incentive of 4 % to 10 % for six years.
- In Solar PV modules incentive is based on performance criteria, sales and local value addition for five years.
- In Advanced Chemistry cell (ACC) battery incentive is based on performance criteria, sales and value addition for five years.
- In textile products incentive is based on performance criteria, sales and local value addition for five years.
- In Automobile Industry and drone industry incentive is based on performance criteria, sales and local value addition for five years and three years respectively.
- In Speciality Steel an incentive of 4 % to 12% for of five years.
Sectors under the scheme
1. Key Starting Materials (KSMs)/Drug Intermediates (DIs) and Active Pharmaceutical Ingredients (APIs)
Approvals have been accorded to 16 applicants under PLI scheme for Promotion of Domestic Manufacturing of critical Key Starting Materials (KSMs)/ Drug Intermediaries and Active Pharmaceutical ingredients (APIs) in the country. The setting up of these plants will lead to a total investment of INR 348.70 crore. There will also be a hike in employment generation of about 3,042 by the companies. The main objective is to attain self-reliance band reduce import dependence in these critical Bulk drugs.
Ministry: Ministry of Chemicals and Fertilizers.
2. Large Scale Electronics Manufacturing
Production linked incentive scheme for Large Scale Electronics Manufacturing offers a production linked incentive to boost domestic manufacturing and attract large investments in mobile phone manufacturing and specified electronic components. This scheme will establish India at the global level in electronics sector by tremendously boosting the electronic manufacturing landscape. this scheme was implemented by a Nodal Agency which acted as a project Management Agency. The ministry is Electronics and IT and has approved 16 proposals under the second round which includes Deki electronics, Continental device India, Vishay components etc.
Ministry: Ministry of Electronics and Information Technology
3. Medical Devices
Medical devices are identified as a priority sector in India and are also committed to strengthening the manufacturing ecosystem. It promotes the domestic manufacturing of medical devices and proposes a financial boost to domestic manufacturing and attracts large investments in this sector. Some of the eligible medical devices under this scheme are Radiology, imaging and nuclear imaging devices, Cancer care/radiotherapy, Anaesthetics, cardio-respiratory and renal care and all implants. In 2021 government approved 8 companies under this scheme to promote domestic manufacturing of Medical Devices and this would lead to a total committed investment of about 151.12 crores by the companies. In FY20, foreign investment increased 98% YoY to Rs 2916 crore as against 1108 crore in FY19.
Ministry: Ministry of Chemicals and Fertilizers.
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