The Government of India launched the Production Linked Incentive (PLI) scheme in March 2020 to boost domestic production and reduce the import burden. Through this PLI scheme, the government provides incentives to Indian companies based on the sales of their products.

This topic of the ‘Production Linked Incentive (PLI) Scheme’ is important from the perspective of the UPSC IAS Examination, which falls under General Studies Paper 2 and 3 (Mains) and General Studies Paper 1 (Preliminary) and particularly in the Governance and Economic Development section UPSC Exam. 

In this article, we shall discuss the ‘Production Linked Incentive (PLI) Scheme’ and learn about the Sectors Covered under the Production Linked Incentive Scheme, its Objectives, Challenges & More!

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Latest News about the Production Linked Incentive Scheme

Recently, The Central Government considered the 2nd phase of the Production Linked Incentive scheme (PLI 2.0) for the textile sector to support the industry to compete globally with top exporting countries such as China and Vietnam.

In November 2022, The Union Minister for Textiles, Commerce, and Industry directed ministry officials to conduct extensive research before finalising the contours of PLI 2.0.

What is Production Linked Incentive Scheme?

The PLI scheme was launched in response to India’s Make in India Initiative and the Atmanirbhar Bharat campaign and it aims to increase domestic manufacturing capacity while increasing import substitution and job creation.Initially, the Production Linked Incentive (PLI) Scheme targeted the following three industries:

• Electrical Component Manufacturing
• Mobile and Mobile Accessories Manufacturing
• Medical Devices

Launch

The central government launched the PLI scheme for large-scale electronics manufacturing in India for the first time in April 2020, but it was later expanded to 13 other key sectors at the end of October 2022.

Controlling Ministries and Implementing bodies involved

The Production Linked Incentive (PLI) Scheme is implemented by the concerned ministries and departments in various sectors of India.

Objectives of the Production Linked Incentive Scheme

The primary objective of the Production Linked Incentive (PLI) scheme is to provide companies with incentives for incremental sales of goods manufactured in domestic units.

The Production Linked Incentive (PLI) scheme also has the following objectives:

• Create 60 lakh new job opportunities.
• Increasing Indian exports.
• Lowering import bills.
• Increase the domestic economic scale.
• To attract foreign investment in cutting-edge technology.
• Increase additional production by 30 lakh crore over the next five years.
• Increase opportunities for off-farm employment.

Sectors Covered under the Production Linked Incentive Scheme

Currently, the Production Linked Incentive (PLI) Scheme covers 14 major sectors. The government will provide a total incentive of 1.97 lakh crores to Indian manufacturing companies under different heads, some of which are as follows:

PLI Scheme for Auto Sector

Here are some facts about Production Linked Incentive (PLI) Scheme for Auto Sector (PLI-Auto):

• The Union Government announced the Production-Linked Incentive (PLI) Scheme in the Automobile and Auto Components sectors in March 2022.
• The PLI scheme has a 25,938 cr outlay for the automobile, and the auto component sector recommends financial incentives of up to 18% to boost domestic manufacturing of advanced automotive technology products.
• The PLI Auto scheme will be implemented over five years beginning in the fiscal year 2022-23.
• Since then, 95 applicants have been approved under this PLI Auto scheme, 20 under Champion OEM and 75 under Component champion.
• PLI Auto Scheme will encourage investments in the domestic automotive manufacturing value chain as part of Make in India and the AtmaNirbharBharatAbhiyan.

PLI Scheme for Textile Sector

Here are some facts about the production-linked incentive (PLI) scheme for the Indian textile industry:

• The Union Government released the operational guidelines for the production-linked incentive (PLI) scheme for the Indian textile industry in December 2021.
• The Production-Linked Incentive (PLI) scheme for Textiles aims to strengthen India’s manufacturing capabilities in Man-Made Fiber (MMF), MMF apparel, and technical textile products globally.
• The union government is investing Rs 10,683 crore in the Production Linked Incentive Scheme for Indian Textiles to help Indian firms improve their global competitiveness.
• The PLI Textile scheme will be implemented from FY2022-23 to FY2023-24.
• However, performance years will be from fiscal years 2025 to 2029, and incentives can be claimed from fiscal years 2026 to 2030.

PLI Scheme for Food Processing

Here are some facts about Production Linked Incentive (PLI) Scheme for Food Processing Industry (PLISFPI):

• The Union Government announced the Production-Linked Incentive (PLI) Scheme in the Food Processing sector in March 2021.
• The union government is investing Rs 10900 crore through the Production Linked Incentive Scheme for Food Processing Industry (PLISFPI) to assist Indian food companies in improving their global competitiveness.
• The PLISFPI Scheme aims to aid Indian food manufacturing businesses with specified minimum sales and a willingness to make specified minimum investments for the expansion of food processing capacity and global branding.
• In addition, the PLISFPI Scheme aims to increase off-farm employment opportunities, ensure fair market prices for farm products, and increase farmers ’ income.
• The PLISFPI Central Sector Scheme will be implemented over a six-year period from 2021-22 to 2026-27.

Know more on the Remission of Duties and Taxes on Exported Products (RoDTEP) Scheme for UPSC!

Expansion of the PLI Scheme

The PLI scheme was first announced in 2020, and it has been expanded several times since then. The latest expansion of the PLI scheme was announced in February 2022. The expansion includes 14 new sectors. The total outlay for the expanded PLI scheme is INR 26,000 crores. Here are some of the sectors that have been included in the expanded PLI scheme:

• Telecommunications
• White goods
• Food processing
• Drugs and pharmaceuticals
• Medical devices
• Textiles
• Chemicals
• Electronics
• Automobiles
• Batteries
• Solar cells and modules
• High-efficiency solar modules
• Specialty steel
• Advance chemistry cell (ACC)

The government expanded the PLI scheme with the following goals:

• To make India an integral part of the global supply chain and enhance exports.
• To meet the growing demand for electronics. India is expected to have a USD 1 trillion digital economy by 2025.
• To make the Indian automotive industry more competitive and enhance the globalization of the Indian automotive sector.
• To attract large investments in the Indian textile industry and boost domestic manufacturing. This is especially in the manmade fibre (MMF) segment and technical textiles.
• To expand export opportunities for India, as the country is the second-largest producer of steel in the world.
• To contribute to the economic growth of the country and make India a manufacturing hub globally.

Know more on the Remission of Duties and Taxes on Exported Products (RoDTEP) Scheme for UPSC!

Need for Production Linked Incentive Scheme

The following are the reasons why India requires the Production Linked Incentive (PLI) Scheme:

• To strengthen India’s manufacturing sector.
• Domestic manufacturers can be encouraged to be more competitive in the global market by providing incentives.
• Need to reduce India’s import burden.
• To create a competitive environment within domestic manufacturers in order to increase sales and marketing.
• To support India’s Make in India Initiative and the Atmanirbhar Bharat campaign.

Know more on Import Cover for UPSC!

Challenges in implementing PLI Scheme

Here are some challenges to implementing the PLI Scheme.

• Electronics, medical devices, textiles, and automobile and automobile component manufacturing are just a few of the industries that are struggling to find enough PLI participants.
• There was no agreed-upon set parameter to assess the value added by companies that have received or are likely to receive PLI incentives.
• Only three to four companies had met the incremental sales targets to be eligible for the PLI scheme in the previous fiscal year.
• Most businesses either do not meet the eligibility requirements for the PLI scheme or believe that the return on investment is less than the declared incentive.
• Departments and ministries that interact with companies in their sector face unique challenges.

Production Linked Incentive Scheme Key Facts For UPSC

Here are major key facts about Production Linked Incentive (PLI) Scheme for UPSC Exam:

Learn more on Making India Manufacturing Hub for UPSC here!

Way Forward

The following are some suggestions for the Production Linked Incentive (PLI) Scheme:

• The government will take priority over supply chain co-location.
• Most domestic producers relied on one or two severely disrupted supply chains.
• The government must pay special attention to the service sector under the PLI Scheme.
• The government should expand the PLI scheme to include more target segments.
• The government should reduce the requirements of the PLI scheme for the production of automobiles and automobile componentry, medical devices, textiles, and other sectors to qualify for the PLI Scheme.

Conclusion

The Production Linked Incentive (PLI) Scheme is being implemented in India in the hopes of achieving economies of scale that will make domestic manufacturing competitive, as well as benefits such as job creation and export capabilities.

Download the PDF on the Production Linked Incentive Scheme here!

UPSC Previous Year Questions

Q1. Investment in infrastructure is essential for more rapid and inclusive economic growth.” Discuss in light of India’s experience. (UPSC Mains 2021, GS Paper 3)

Q2. The emergence of the Fourth Industrial Revolution (Digital Revolution) has initiated e-Governance as an integral part of government. Discuss. (UPSC Mains 2020, GS Paper 2)

Check out the test series for UPSC IAS Exam here.

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