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PLI schemes evoke mixed response: IT, mobile steal a march on other sectors

The government had to, for instance, re-open applications for its PLI scheme for medical devices due to certain issues faced in filling up the 28 slots the first time around.

Written by Aashish Aryan , Prabha Raghavan | New Delhi |
July 12, 2021 3:00:11 am
The PLI schemes for these three sectors have already crossed the expression of interest, invitation of applications and selection of participating companies stages.

The production-linked incentive (PLI) schemes for mobile phone and electronic components manufacturing, information technology (IT) hardware manufacturing as well as communications networking products have shown initial promise, even as the scheme is struggling across most other sectors where it’s been rolled out.

The PLI schemes for these three sectors have already crossed the expression of interest, invitation of applications and selection of participating companies stages. But sectors such as medical devices, textiles as well as automobile and automobile component manufacturing are struggling to find enough participants for the PLI scheme, sources told The Indian Express.

The reasons for low interest, sources said, is that most companies either do not meet the qualification norms for the PLI scheme, or feel that the return on investment is low compared to the incentives announced.

The government had to, for instance, re-open applications for its PLI scheme for medical devices due to certain issues faced in filling up the 28 slots the first time around. While 28 applications were received the last time, as many as 15 of them were “not eligible” as they did not meet specific criteria for the categories of devices for which they had applied, The Indian Express has learnt.

As a result, the government was only able to fill 13 slots for the scheme’s four target segments.

“A second round of applications have already been invited for the slots that remain … the others who had applied (in the first round) were not eligible. This was the first time for the industry to navigate a PLI scheme. This time, they would probably have a better understanding of (how to go about the process),” said a source close to the development on condition of anonymity.

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In the latest round, the government is also looking to receive applications for additional devices like oxygen concentrators, according to the person. “In medical devices, one of the challenges is that, at the moment, there aren’t many domestic manufacturers,” the source told The Indian Express. One of the reasons that domestic manufacturers do not want to invest is that low tariffs make it more convenient to rely on importing these devices, a source said.

“They would probably feel more confident if they felt that, with the incentives, they would be able to compete with imports,” said the person. However, the government would have to ensure availability of these devices domestically in order to be able to increase tariffs, the person added.

The Department of Pharmaceuticals has been in discussions with some domestic medical device makers individually to “gauge their interest”. It has also been utilising Invest India to identify potential investors, The Indian Express has learnt.

Similarly, sources said the players in speciality steel sector are not very keen on applying under the scheme as they feel that the period of 5 years is too less to set up new units and start production from them or even expand old units.

“Their (the companies) concern is that since the sector is extremely capital intensive, at least 10 years would be needed to see off the initial gestation period and then obtain the return on investments,” a source close to the development said.

In the case of PLI for automobile and automobile component manufacturing, most Indian companies do not meet the qualification norms and have, therefore, avoided even applying for the scheme. For textile sector, similarly, the government is now considering adding more products in the list of eligible products to attract applicants.

Among the sectors that have received the maximum number of applications under the scheme are food, mobile and specified electronic component manufacturing, IT hardware, as well as telecom equipment manufacturing.

The mobile phone and specified electronics component manufacturing, notified on April 1 last year, had received and approved applications from 16 companies, including Apple’s contract manufacturers Foxconn Hon Hai, Wistron and Pegatron. Of the three, Wistron has so far invested more than Rs 1,200 crore in its Indian factories, a government official said.

For the PLI scheme in IT hardware products, similarly, the IT Ministry received and approved applications from global leaders such as Dell, Wistron, Flextronics, Foxconn, and 10 other leading domestic players.

While the nodal ministry for the implementation of mobile phone as well as IT hardware PLI is the IT Ministry, the Ministry of Communications is overseeing the PLI for telecom and networking products. The ministries, earlier held by senior BJP leader Ravi Shankar Prasad, are now being led — after the Cabinet reshuffle — by former Indian Administrative Services officer Ashwini Vaishnaw.

Similarly, under the PLI scheme for food manufacturing, which has an outlay of Rs 10,900 crore, the government had received more than 250 applications and will select the final applicants soon, sources said. There is also a “high degree” of interest in the Rs 15,000-crore PLI scheme for Pharmaceuticals, for which the first round of applications are open until the end of July.

As of Friday evening, 95 applicants had registered for this scheme, which has 55 slots in total, according to a source directly aware of the development. The PLI scheme for critical bulk drugs too received as many as 215 applications. Of these, the government had selected 47 applicants spread across the four target segments in focus for the scheme.

However, this scheme, too, requires additional applicants to fill around 10 slots for “a few” bulk drugs for which there were “fewer applications than was needed,” a senior government official told The Indian Express, requesting anonymity.

“The industry is very excited about this PLI scheme. Significant and very strong stakeholder consultations are taking place (with the Department of Pharmaceuticals) and the industry is looking forward to participating very actively,” said Indian Pharmaceutical Alliance secretary general Sudarshan Jain.

The DoP has been “deeply” involved in providing clarifications regarding the submission process for this scheme, according to him.

Jain expects the response to this scheme to be “competitive,” as ongoing stakeholder discussions have indicated that a large number of applications may be submitted by the end of July.

“I’m hearing of a lot of interest, and many companies have already started applying,” he said. “There will be choice of selection in this scheme,” he added.

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