What is Production Linked Incentive Scheme?

Ashish M. Shaji

07 Apr, 2022

The production linked incentive scheme was introduced first in 2020 with a view to boost domestic manufacturing. This scheme has been launched in 13 sectors identified by the government with a total outlay of approx. 2 lakh crore rupees. It also aimed at encouraging foreign companies to find workforce in the country and thus generate employment. In this article, we shall discuss the main aspects of this scheme.

Production Linked Incentive Scheme- Overview

The Production linked incentive scheme is an initiative that provides incentives to domestic industries to boost domestic production. It involves financial incentives for businesses to augment their output, whether in the form of tax rebates, lowered import and export duties or land acquisition norms. This scheme has been launched in line with India’s Atmanirbhar Bharat^[1] Campaign.

Objectives–

This scheme was introduced with four objectives-

• To Target specific product areas;
• Introduce non-tariff measures to compete effectively with cheap imports;
• Blend domestic sales and export sales to ensure manufacturing remains competitive and sustainable;
• To promote manufacturing domestically while encouraging investment from India as well as outside India.

Some of the main features of this scheme are as follows:

• Introduced as a part of the national policy on electronics to provide incentives of 4-6% to electronic companies and manufacturing electric components such as phones, transistors etc.
• The main objective of the scheme is to attract foreign investors to set up their manufacturing units in India and to promote and encourage local manufacturers to widen their units and generate employment.
• One the primary sectors which were targeted under this scheme was the large scale electronics manufacturing sector. Later this scheme went onto target 10 other sectors, namely- food processing, telecom, electronics, speciality steel, automobiles and auto components, aviation, textile apparel, solar photovoltaic modules and white goods like ACs and LEDs.
• The eligibility requirement of this scheme entails that the companies that are electronic manufacturing companies having a registered unit in India can apply for this scheme. Detailed eligibility requirements have been discussed below;
• In the Union Budget of 2021, Finance Minister had said that 13 more sectors have been included under this scheme for a period of 5 years and an amount of 1.9 lakh crore rupees have been allocated for this scheme.

Expansion of this scheme

This scheme has been expanded to include 10 more sectors. Below we list down the sectors to which the scheme has been expanded and also the approved financial outlay:

By expanding this scheme to these sectors, government seeks to achieve the following targets:

• The government seeks to turn India into a hub of global supply chain and enhance exports;
• India aims to have USD 1 trillion digital economy by 2025 as the demand for electronic goods may increase under its projects such as Digital India;
• This scheme is expected to make the automotive industry competitive and shall enhance the globalisation of the automotive sector in India;
• The textile industry is a large industry, and with the help of this scheme, this industry is expected to lure investments in the sector which will boost domestic manufacturing in the manmade fibre segment and technical textiles.
•  India is the second largest steel producer in the world, and with introducing steel under this scheme will expand export opportunities;
• Further, telecom, pharmaceuticals, white goods and other sectors can also add to the overall economic growth of the county and transform India on a global level.

Eligibility requirements to apply for Production Linked Incentive Scheme

The eligibility requirements may vary from one sector to the other. For example, the eligibility required for automobile sector may vary as compared to any other sector. Having said that, we provide you with a general eligibility requirement under this scheme:

• The eligibility for telecom units shall depend on the collective incremental investments and sale of produced goods;
• SMEs and other enterprises need to hold 50% of their stock of subsidiaries in the food processing sector;
• In case of pharmaceuticals manufacturing, the net worth of the applicant company must not be below the threshold limit of 30% of the total investment. This project should fall under the green field project;
• In case of fermentation based goods, the Domestic Value Addition should be minimum 90%;
• The Domestic Value Addition of chemical synthesis based products must be 70%.

How can you apply for PLI scheme?

The application procedure is simple however different sectors follow different application procedure. We have provided a basic example of applying for this scheme:

• Firstly you need to visit the official website of this scheme;
• On the homepage, click on Register;
• Then you need to fill in the application form and provide details such as the PAN, organization name etc.
• After you have completed your application, click on register.

Conclusion

The Indian economy is dependent on production based sectors for its growth. Hence to support their growth and development and enhance the revenue, the central government introduced the Production Linked Incentive scheme. The PLI scheme assists beneficiaries in concessions on import & export duty, tax rebates, affordable land acquisition, etc.

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