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Auto to tech, 10 more sectors to gain from hike in PLI allocation

The PLI scheme for these ten sectors will be operational for five years with a total estimated outlay of Rs 1.45 lakh crore.

Written by Aashish Aryan , Prabha Raghavan | New Delhi | Updated: November 12, 2020 4:06:53 pm
Auto to tech, 10 more sectors to gain from hike in PLI allocationFinance Minister Nirmala Sitharaman briefing the press after the Cabinet meeting on Wednesday, November 11, 2020. (Screengrab: YouTube/PIB)

The Union Cabinet on Wednesday approved an expansion of the Production-Linked Incentive (PLI) scheme to include 10 more labour-intensive industry segments, including advance chemistry cell batteries, electronic and technology products, automobiles and auto components manufacturing, among others.

The PLI scheme for these ten sectors will be operational for five years with a total estimated outlay of Rs 1.45 lakh crore.

The scheme for these sectors will be in addition to the PLI schemes for mobile phones and allied equipment manufacturing, pharmaceutical ingredients and medical devices. The government had planned an outlay of Rs 51,311 crore for these sectors over the next five years. The total outlay on PLI schemes for the next five years would now effectively exceed Rs 2 lakh crore.

“These are sunrise sectors selected keeping in mind the need for job creation and getting India to link to the global value chain… the larger umbrella principle is we have to have a self-reliant India,” Finance Minister Nirmala Sitharaman said, briefing the media after the Cabinet meeting.

Explained

Boost local production, cut imports

The PLI scheme aims to boost domestic manufacturing and cut down on imports by providing cash incentives on incremental sales from products manufactured in the country. Besides inviting foreign companies to set shop in India, the scheme aims to encourage local companies to set up, or expand, existing manufacturing units.

The new sectors included under the PLI scheme are mostly labour-intensive and will be implemented by the respective ministries, the government said in a press statement.

For instance, the Niti Aayog will implement the PLI scheme for the manufacture of advanced chemistry cell batteries, for which a sum of Rs 18,100 crore has been allotted for five years. The Ministry of Electronics and Information Technology, the nodal ministry for the implementation of the PLI scheme for mobile phone manufacturing, will also oversee the scheme for electronic and technology products. A sum of Rs 5,000 crore has been set aside for this sector.

In the case of pharmaceuticals, the Rs 15,000-crore outlay will be in addition to an existing Rs 6,940-crore PLI scheme announced earlier this year for building self-reliance in over 50 key drug ingredients.

“The earlier scheme was only for APIs (Active Pharmaceutical Ingredients), KSMs (Key Starting Materials) and drug intermediates. This scheme is expected to be for formulations, complex APIs, excipients, biosimilars, vaccines and other critical therapeutic categories,” said a senior government official on condition of anonymity. “Some drugs including many biosimilars are not made in India and are available only outside the country,” the official said.

The PLI outlay for automobiles and auto components is the highest at Rs 57,042 crore over five years, which roughly translates to Rs 10,000 crore a year.

“The inclusion of high-demand high-technology items such as semiconductor fab, IoT devices and ACC batteries in the newly announced PLI scheme will greatly boost India’s manufacturing capacities and catapult it among major manufacturing hubs,” said Baba Kalyani, Chairman and Managing Director, Bharat Forge.

Other labour-intensive areas such as textile and food products, high efficiency solar photovoltaic modules, white goods and speciality steel manufacturing have also been brought under the ambit of the PLI scheme. The respective nodal and implementing ministries and departments will have to prepare a detailed plan on how the outlay allotted to each sector will be utilised over the next five years, Sitharaman said.

“The final proposals of PLI for individual sectors will be appraised by the Expenditure Finance Committee (EFC) and approved by the Cabinet. Savings, if any, from one PLI scheme of an approved sector can be utilised to fund that of another approved sector by the Empowered Group of Secretaries. Any new sector for PLI will require fresh approval of the Cabinet,” the press statement said.

Experts have said the country needs a PLI scheme in sectors which are capital intensive but can not always see the government investing as the return on investment is slow. The PLI scheme for mobile manufacturing was approved for as many as 16 companies, including the three biggest suppliers of Apple.

“We will have to see how the government balances the conditions of these PLI schemes, which have been attached for valid reasons to ensure that the production that takes place is competitive, with the overarching objective of promoting ease of doing business,” said trade expert Biswajit Dhar, Professor at Jawaharlal Nehru University’s Centre for Economic Studies and Planning.

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