DH Deciphers | What is a PLI scheme? How will it help make India 'Atmanirbhar'?

India introduced the PLI scheme to promote indigenous production and reduce dependence on a single market or geographical region

The union cabinet has announced a Rs 76,000-crore Performance Linked Incentive (PLI) scheme to boost the production of semiconductors in the country. This is the fourteenth PLI to be introduced since April 2020 when the first such scheme was announced for smartphone companies. The PLIs have been touted as the key to realising the ambitious dream of 'Atmanirbhar Bharat' and creating jobs — tasks that the government has struggled to accomplish. So what exactly are these PLIs? And how will they help India become a global manufacturing hub?

What is a PLI?

As the name suggests, a PLI is the sum of government incentives that are directly linked to manufacturing performance. The more goods companies manufacture in India the better incentives they will get. The incentives are of diverse types: subsidies, monetary benefits, etc. The government offers PLIs to both foreign manufacturers and domestic companies. While foreign manufacturers are encouraged to start production in India, domestic companies are asked to expand their operations and export. In all, the government will spend Rs 3,46,827 crore on these 14 PLI schemes. The government estimates that the minimum production in India as a result of the PLIs will reach Rs 37.5 lakh crore ($500 billion) in five years.

Why are these incentives needed?

After Covid-19 struck the world in early 2020 and various measures of containment were introduced to stop the spread of the deadly virus, it was crystal clear that most countries, including India, were overly dependent on China for hardware, electronic components and medicines. India then introduced the PLI scheme to promote indigenous production, reduce dependence on a single market or geographical region, cut down on imports and make domestic industries globally competitive. Since manufacturing is a capital-intensive industry and has a long gestation period, incentivising capital-rich global firms to set up facilities for incremental output makes more sense, say experts. This apart, the schemes will help create more than one crore jobs, according to the commerce ministry.

Which industries have received PLI approvals?

The first scheme was notified on April 1, 2020, for the large-scale production of electronic/technology products with a special focus on mobile phones. It has a total outlay of Rs 40,995 crore ($5.7 billion) over five years, which translates to 4-6% of incremental sales (sales generated as a direct result of the PLI as opposed to the normal sales). The PLI envisages the production of 100 crore mobile phones worth Rs 14.25 lakh crore by 2025.

Similar PLIs were subsequently launched for 13 other sunrise and strategic sectors: auto components, automobiles, aviation (drones), chemicals, food processing, medical devices, metals and mining, pharmaceuticals, renewable energy, telecom, textile & apparel, white goods (consumer durables) and semiconductors.

Who decides which sector needs incentives?

It's the NITI Aayog, India’s apex public policy think tank, which makes recommendations to the union cabinet after detailed deliberations with the ministries or departments concerned.

Which are the notable companies that have received PLI approvals?

In the IT hardware sector, companies like Dell, Wistron and Foxconn have received PLI approvals. For the telecom PLI, Foxconn, Nokia and Dixon are some notable names.

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