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The Cabinet chaired by prime minister Narendra Modi on Wednesday approved two production linked incentive (PLI) schemes for air conditioners, LED lights and solar modules worth 10,738 crore.

PLI schemes, originally announced last year, seek to create global manufacturing champions in India by removing sectoral disabilities and creating economies of scale to develop complete component eco-systems in India. Prime Minister Narendra Modi in February invited global firms to take advantage of the 1.97 trillion PLI schemes for 13 sectors and expand their manufacturing in India.

While the PLI scheme for the white goods is worth 6238 crore, for solar modules the scheme is worth 4500 crore.

The Cabinet secretariat in a statement said selection of companies for the white goods PLI scheme will be done to incentivize manufacturing of components or sub-assemblies which are not manufactured in India presently with sufficient capacity and that mere assembly of finished goods will not be incentivized. “Companies meeting the pre-qualification criteria for different target segments will be eligible to participate in the scheme. Incentives shall be open to companies making brown field or green field Investments. Thresholds of cumulative incremental investment and incremental sales of manufactured goods over the base year would have to be met for claiming incentives," it added.

Over a period of five years, the PLI scheme for white goods is expected to lead to incremental production worth 1.7 trillion, exports worth 64,400 crore with additional employment generation of more than 500,000 jobs. The scheme is also expected to generate revenue of 11,300 crore and 38,000 crore respectively through direct tax and goods and services tax over the five-year period. The scheme for white goods will extend an incentive of 4-6% on incremental sales over the base year (2019-20) for goods manufactured in India and covered under target segments to eligible companies.

Manish Sharma, President & CEO, Panasonic India said the announcement on PLI scheme for ACs is encouraging and he sees a lot of exciting developments in component design capability and growth of the SMEs in foreseeable future. “We have always maintained that one of the key pillars to drive up manufacturing and exports is backward integration. As component manufacturing is a key beneficiary of the new policy, indigenous AC manufacturing will get a fillip. This will also enable design led manufacturing, fuel innovation and drive component exports along with finished ACs from India," he added.

The PLI scheme for solar photo voltaic modules is expected to add 10,000 MW capacity of integrated solar PV manufacturing plants and bring direct investment of around Rs.17,200 crore, thus creating 30,000 direct employment.

At present, India has a domestic manufacturing capacity of only 3 GW for solar cells and 15GW for solar modules. The scheme comes in the backdrop of India’s decision to impose 40% basic customs duty on solar modules and 25% on solar cells from 1 April 2022, a move that would make imports costlier and encourage local manufacturing.

The market for solar components is dominated by Chinese firms. India imported $2.16 billion worth of solar photovoltaic (PV) cells, panels and modules in 2018-19. A surge in imports prompted the government to impose a safeguard duty from 30 July 2018 on solar cells and modules imported from China and Malaysia. The safeguard duty, which was set to expire on 29 July, has been extended by a year.

Utpal Bhaskar and Suneera Tandon contributed to this story

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