The extension of the Production-Linked Incentive (PLI) scheme for large-scale electronics manufacturing by one year is likely to boost job creation as newer players are now expected to join the fold.
Finance minister Nirmala Sitharaman made the announcement on June 28.
The scheme was slated to begin in 2020-21 and continue for five years. This will now continue till 2025-26, she said. Participating companies will now get five more years for meeting their production targets.
The extension was due to production delays and component shortages amidst COVID-19.
Kamal Nandi, Consumer Electronics and Appliances Manufacturers Association (CEAMA) president, and Business Head & Executive Vice President, Godrej Appliances, said that as the sector is recovering from the impact of the pandemic, the additional year will provide relief.
"Companies which were not able to achieve targets will benefit. This will go a long way in boosting indigenous manufacturing in various sectors, including consumer durables and white goods. This, in turn, will help create more job opportunities, and will also give an upward thrust on the economy by bringing in large-scale manufacturing to India," he added.
The PLI scheme
High-end televisions, air compressors for air conditioners, laptop processors, CPU chips as well as smartphones are imported from markets like China. Amidst the Coronavirus outbreak and calls to boycott Chinese goods, Prime Minister Narendra Modi had called for Aatmanirbhar Bharat (self-reliant India) in a speech in May 2020.
Following this, in November 2020, the Union cabinet approved the PLI scheme for 10 sectors.
These are pharmaceuticals, automobiles and auto components, telecom and networking products, advanced chemistry cell battery, textile, food products, solar modules, white goods, specialty steel, and high efficiency solar PV modules.
Nandi said that the scheme will provide a boost to the ‘Make-in-India’ initiative and help India become a manufacturing hub.
The PLI scheme for white goods became operational on April 1, 2021. Under this, eligible players in the air-conditioner and LED manufacturing space will be offered incentives worth Rs 6,238 crore over five years.
Over and above this, the scheme for laptops and IT hardware has a total size of approximately Rs 7,350 crore over four years.
It also incorporates cash incentives of 4-6 percent on incremental sales made over the base year of 2019-20 for five years. This means that companies will be eligible for incentives only if they exceed the production numbers of the base year.
How will it benefit employment?
The finance minister said that companies were not able to meet targets due to movement restrictions, lockdowns, delay in plant/machinery installations and disruptions in supply chain.
Shreegopal Kabra, Managing Director & Group President, RR Global, said that the extension of the scheme would benefit companies which have already made investments under the scheme.
“These companies couldn't complete their mandatory targets due to the pandemic . The revised scheme will also attract many new companies," he added.
Industry experts are of the view that the entry of new companies will help in generating jobs in manufacturing facilities that will be set up.
Sudeep Sen, Business Head, Industrial Manufacturing and Engineering & General Staffing, TeamLease Services, said that the PLI extension will lead to more opportunity for large-scale as well as mid-sized electronic manufacturing companies.
“It means they will get one more year for production and sales benefit for one additional year. This shall create an additional 8-10 percent of additional jobs. It will also mean additional jobs in the adjacent sectors and support systems units,” said Sen.
It is also likely that this scheme would be an incentive for mid-sized electronics players from South-East Asia.
Sudarshan Purohit, senior-vice president and analyst for white goods at CPG Consulting said that 2020 did not see PLI entrants into India due to the pandemic.
"We lost out an entire year with mini lockdowns throughout India. Since there is now an extension till 2026, companies from neighbouring markets will be keen to enter, considering the demographic dividend. This would also boost hiring at R&D areas and blue-collar workers," he added.
The idea behind the PLI scheme is to transform manufacturing from 'assemble in India' to ‘make in India.’ The product segments that could benefit include laptops, smartphones, air conditioners, televisions and washing machines.
Sen also explained that the PLI incentives will boost demand for permanent staff as well as contractual workforce. Niche roles could also open up.
“Contractual workforce shall see a spike in employment by 6-9 percent, and the demand for component assemblers, quality specialists and testing specialists will go up. This will also mean more employment for the female staff as we have seen higher participation of women workforce in electronic manufacturing units," he added.
When it comes to electronics products like laptops and tablets, Ravi Shankar Prasad, Union Minister for Electronics and Information Technology, had earlier said that the total production will be worth Rs 3.26 lakh crore over the next five years, of which about 75 per cent will be for export.
Apart from building manufacturing facilities locally, the government said that the PLI scheme has the ability to create over 1,80,000 jobs (direct and indirect) over four years.