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Production Linked Incentive (PLI) Scheme:

Posted On: 17 NOV 2021 16:51 PM

For Large Scale Mobile and Component Manufacturing

 

1. Introduction

  • The Production Linked Incentive Scheme (PLI) for large scale electronics manufacturing proposes a financial incentive to boost domestic manufacturing and attract large investments in the electronics value chain including mobile phones and specified electronic components.
  • In the Union Budget 2021-22, presented on 1 February 2021, the Finance Minister announced an outlay of RS. 1.97 Lakh Crores for the Production-Linked Incentive (PLI) Schemes for 13 key sectors, to create national manufacturing champions and generate employment opportunities for the country’s youth. This means that minimum production in India as a result of PLI Schemes is expected to be over US$ 500 billion in 5 years.PLI Schemes are a cornerstone of the Government’s push for achieving an Atmanirbhar Bharat.

 

  • The electronics Industry permeates all sectors of the economy and has cross-cutting economic and strategic significance. Recognizing the sector's unique dynamics, significant opportunities, and structural challenges, the Government of India notified the National Policy on Electronics (NPE) 2019 on 25.02.2019.
     
  • One of the objectives of NPE 2019 is to promote domestic manufacturing in the entire ESDM value chain for economic development to achieve a turnover of over RS.30,00,000 crore (USD 400Billion) by 2025 This will include targeted production of 100 crore mobile phones, valued atover RS. 14,25,000 crore (USD 190 Billion) by 2025.

 

2. Genesis of the PLI Scheme:

  • During the COVID-19 pandemic, it was clearly visible that most of the countries around the world including India were overly dependent on a single country for electronic hardware and components imports.
  • Sudden events can cause a large-scale shortage of electronic components and disrupt manufacturing.
  • It is important to promote indigenous production and reduce dependency on a single market or geographical region.
  • The PLI Scheme was rolled out to effectively integrate India’s manufacturing capabilities with the demands of global supply chains and to promote domestic value addition and exports.
  • The scheme aims to position India as a global hub for Electronics System Design and Manufacturing (ESDM) by encouraging and driving capabilities in the country for developing core components, including chipsets, and creating an enabling environment for the industry to compete globally.

3. Salient Features of the Scheme:

  • The scheme was notified on 01.04.2020.
  • PLI guidelines were released on 01.06.2020.
  • Eligibility: Thresholds of Incremental Investment & Production.
  • Quantum of Incentive: Incentive of 4% to 6% on incremental sales (over base year), for a period of five years subsequent to the base year (incentives applicable from 01.08.2020).
  • Target Segments:
  • Mobile phones: Invoice value Rs 15,000 and above
  • Mobile phones: Domestic companies.
  • Specified electronic components.

 

4. Proposed Outcomes:

The companies approved under the scheme are expected to generate the following:

  • Production:
    • Over Rs 10.5 lakh crore (USD 141 billion) in next five years
    • Mobile Phone (Invoice Value Rs 15,000 and above): Proposed production of over Rs 9 lakh crore (USD 122 billion)
    • Mobile Phone (Domestic Companies) Proposed production of over Rs 1.23 lakh crore (USD 16 billion)
    • Specified Electronic Components Proposed production of over RS. 15,700 crore (USD 2.1 billion)
  • Export: Out of total production, around 60% (Rs 6.5 lakh crore / USD 84 billion) will be contributed by exports in the next five years
  • Investment: Around RS. 11,000 crore (USD 1.43 billion)
  • Employment: Over 2 lakh (0.2 million) direct employment is likely to be generated in the next five years along with an additional indirect employment of nearly three times
  • Domestic Value Addition: Expected to grow from the current 15-20% to 35-40% in case of Mobile Phones and from 25-35% to 45-50% for electronic components.

 

5. Impact on Electronic Manufacturing:

  • This Scheme will provide an impetus for moving significant manufacturing capacities to India thereby creating large economies of scale which will further drive the supply chain ecosystem into the country.
  • The Scheme will lead to new investments and increased tax revenues in the electronics manufacturing sector.
  • The Scheme is expected to contribute significantly to achieving a USD 1 trillion digital economy and a USD 5 trillion GDP by 2025.
  • The scheme along with other government incentives and initiatives are expected to offset India’s overall disadvantage when compared to other global markets by 6.4% -10.9%.
  • The PLI Scheme will help in making India a globally competitive destination for electronics manufacturing and create domestic champions to further our mission of achieving an Atmanirbhar Bharat.
  • The scheme has resulted in investment of Rs 2,336 crore, production of Rs 54,357 crore (export Rs 16,800 crore) and additional employment of 12, 350, as per the March 2021 QRR.

6. PLI as a Trailblazer for the Manufacturing Sector:

  • The Prime Minister's clarion call for "Atmanirbhar Bharat" has brought Manufacturing' to the centre stage and emphasized its significance in driving India's growth and creating employment. A strong, vigorous, and dynamic manufacturing sector must be the driver of India's economic growth.
  • The Production Linked Incentive scheme for Large Scale Electronics Manufacturing has paved the way for domestic manufacturing, providing India with the much-needed impetus to augment its manufacturing capacity and export potential, further promoting the 'Make in India’ Initiative of Government.
  • Emboldened by the industry response from the PLI scheme, Ministry of Electronics and Information Technology (MeitY) is taking additional steps to bring new technologies such as- semiconductor fab and display fabrication into the country which, at present,are only available in a few select developed nations.
  • To further replicate the success of the PLI Scheme for electronics manufacturing, the Union Cabinet chaired by the Prime Minister Narendra Modi, on 11 November 2020, has given its approval to introduce the Production-Linked Incentive (PLI) Scheme in the following 10 key sectors.

 

 

Source: PIB e-Booklet on PLI Scheme

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