Govt may consider course correction for 6 PLI schemes on slow track | Mint

Govt may consider course correction for 6 PLI schemes on slow track

The government had announced the PLI scheme for as many as 14 sectors, such as telecommunication, white goods, textiles and pharma with an outlay of ₹ 1.97 trillion. (AFP)
The government had announced the PLI scheme for as many as 14 sectors, such as telecommunication, white goods, textiles and pharma with an outlay of 1.97 trillion. (AFP)

Summary

Eight of the 14 PLI sectors -- including large-scale electronics manufacturing, pharma, food processing, telecom, white goods, auto and auto components -- have begun to show import substitution and increased manufacturing output.

New Delhi: The Union government is set to review the progress made under the flagship 1.97 trillion-Production Linked Incentive Scheme (PLI) scheme and assess if there is a need for course correction in six schemes that have not taken off yet, a senior government official said on Tuesday.

Eight of the 14 PLI sectors -- including large-scale electronics manufacturing, pharma, food processing, telecom, white goods, auto and auto components -- have begun to show import substitution and increased manufacturing output. But sectors such as high-efficiency solar PV modules, advanced chemistry cell (ACC) batteries, textile products and speciality steel are yet to show expected results.

Department for Promotion of Industry and Internal Trade (DPIIT) secretary Rajesh Kumar Singh at a press briefing on Tuesday said value addition in electronics and mobile manufacturing has increased to 23% and 20%, from negligible value addition in 2014-15. Former Reserve Bank of India (RBI) governor Raghuram Rajan raised concerns about India’s booming mobile phone exports, cautioning that the growth is primarily propelled by assembly rather than genuine manufacturing within the country. He said a key deficiency of the scheme is that the subsidy is paid only for finishing the phone in India, not on how much value is added by manufacturing in India.

DPIIT secretary Singh said value addition for the sector was sharply higher when compared to levels achieved by rival manufacturing countries.

“Value addition achieved by China after several decades is about 49%. Vietnam also managed to achieve 18% after many years. In comparison, India has reached the 20-23% mark in a very short time," he said. Last month, the government announced the PLI 2.0 for IT hardware with a budgetary outlay of 17,000 crore. “We are hopeful of utilizing 1.97 trillion for the scheme...but in an individual scheme, there may be some course correction," Singh told reporters.

The government has disbursed only 2,900 crore till March 2023, out of 3,400 crore claims received. The government had announced the PLI scheme for as many as 14 sectors, such as telecommunication, white goods, textiles and pharma with an outlay of 1.97 trillion.

When asked about the reason for low disbursals, additional secretary in the DPIIT Rajeev Singh Thakur said the next two years would be crucial.

“In eight sectors, we are disbursing the incentives and in the remaining six, we are hopeful (to start the disbursements). This year and next year, we will be on track," he said.

On this, the secretary said they are “not too" concerned about the lag in incentives as investments are coming in.

“We expect the disbursement to pick up...Projects are on the ground, and investments and employment are happening. The disbursement will follow...But yes, there is a lag," he said.

Further, the secretary said proposals for extending fiscal benefits under the production-linked incentive (PLI) scheme for toys, leather and footwear and components for new-age bicycles are in advanced stages. Singh said they all are at different stages of consideration.

In these 14 sectors, the government has received 733 applications as of March this year. In these sectors, 3.25 lakh jobs have been generated and goods worth 2.6 trillion have been exported till 2022-23.

He also pointed out that Apple and its vendors are coming to India and “we want to follow" the success of this sector in other segments also. Thakur said in electronics and mobile manufacturing, value addition has been increased to 23% and 20%, respectively. It was negligible in 2014-15.

According to the department, mobile phones export from India has increased to 90,000 crore during April-December 2022-23 against 45,000 crore in 2021-22. Out of the total mobile phone exports during 2022-23, 82% were by the PLI companies. iPhone 14 exports from India would touch $10 billion in 2024-25, according to a presentation by the department.

According to a statement shared by the commerce ministry there has been significant reduction in imports of raw materials in the Pharma sector after the PLI scheme was implemented.

“Unique Intermediate materials and bulk drugs are being manufactured in India including penicillin-G, and transfer of technology has happened in manufacturing of medical devices such as (CT scan, MRI, etc.). Import substitution of 60% has been achieved in the telecom sector and India has become almost self-reliant in antennae, GPON (Gigabit Passive Optical Network) & CPE (Customer Premises Equipment), drones sector has seen seven times jump in turnover due to PLI scheme which consist of all MSME startups. Under the PLI scheme for food processing, sourcing of raw materials from India has seen significant increase which has positively impacted income of Indian farmers and MSMEs," the ministry added.

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