Budget 2023: Govt must enlarge PLI scheme to new fields to improve manufacturing, say experts

Budget 2023: Govt must enlarge PLI scheme to new fields to improve manufacturing, say experts

According to industry analysts, the federal government should extend its Production-Linked Incentive (PLI) program to more recent industries including leather, toys, and renewable energy.

While largely there is a consensus among industry over the positive impact of the scheme, businesses and experts feel that extending the duration of the scheme, lowering administrative inefficiencies and compliance burdens, and providing a way forward in case of business contingencies, will further improve the program’s efficacy.

In 2020, the central government introduced the Production Linked Incentive (PLI) scheme for 14 sectors with a total incentive outlay of Rs 1.97 lakh crore (or about USD 26 billion). The first PLI scheme was announced in two tranches —  in March 2020 in three sectors, followed by the addition of another ten sectors in November 2020. In September 2021, the PLI scheme was extended to the drone and drone components sector.

The 14 sectors are mobile manufacturing, manufacturing of medical devices, automobiles and auto components, pharmaceuticals, drugs, specialty steel, telecom & networking products, electronic products, white goods (ACs and LEDs), food products, textile products, solar PV modules, advanced chemistry cell (ACC) battery, and drones and drone components.

The key objective of the PLI schemes is to make domestic manufacturing globally competitive by boosting existing capacities in manufacturing for sunrise (new businesses) and strategic sectors, creating global champions in manufacturing and curbing cheaper imports, while also reducing import bills, enhancing export capacity, and generating employment.

In a written reply to Lok Sabha in March 2022, the Union minister of state for Commerce and Industry had said: “So far, 489 applications with an expected investment of over Rs 1.89 lakh crore have been approved under 11 schemes”. He also noted that the PLI schemes in 14 sectors have the potential to create about 60 lakh new jobs over the next five years.

Echoing similar views, the Confederation of Indian Industries (CII) has sought an extension of PLI to wind turbine makers and component manufacturing for the development of new megawatt-size turbines (3 to 5 MW) in the upcoming Budget.

The industry body has also asked the government to consider an interest subvention of 5 percent to modernize the components sector and make it much more competitive.

“This would be similar to the interest subvention of 5 percent provided to the textile industry under the Technology Upgradation Fund (TUF) for textiles which are used for modernization and capital investment in the sector,” it had said in its pre-budget recommendation to the finance ministry.

Midhula Devabhaktuni, Co-Founder and CMO, Mivi, said,  “Government has been introducing schemes and reforms that are in favor of Indian manufacturing brands, in the upcoming Union budget government should focus on supporting and further elevating the ‘Made in India’ consumer durable brands that are making innovative technology more accessible. I also feel that during the last fiscal year, the Indian economy has come on the road to recovery and every industry in the country is bracing for changes that will support its growth trajectory. The Union Budget 2023–2024 will be crucial for the consumer electronics sector as it can facilitate the industry’s effective revival. This year, the government is expected to make significant strides toward turning India into a hub for the manufacture and export of electronic devices. With consumer electronics product export incentives and a low GST, we also expect budget reforms to accelerate growth channeled through consumer demand. Hearable technology is expected to receive incentives under consumer device categories as well, given its widespread use, while also encouraging R&D and design in India, and promoting new supply methods. I think it’s time that the budget focused more on value creation, including special incentives and subsidies for consumer electronics and component manufacturing.”