After low utilisation in its flagship Production Linked Incentive (PLI) scheme, the government is revising its strategy to bring in tailor-made schemes like the capex-backed one for electronics and semiconductors, rather than expanding the PLI plan to more areas.
The ministries are working on individual schemes in areas where there is an appetite from the market, since the government is of the view that the PLI “is one set of policy recommendations that should not be repeated in every sector”, a senior government official told Moneycontrol.
An e-mail has been sent to the commerce ministry for an official comment. We will update the report if and when there is a response.
This could dent the chances of new PLI schemes or even expanding the existing one despite expectations, especially when there have been talks of adding garments to output-linked plans for textiles and adding more to the one for medical devices.
“Once the ministries realise PLIs are not coming they will take a different route wherever there is appetite in the market and response from the government,” this official said, adding that the Centre is keen to push alternatives to the output-linked incentive plan for faster results.
The Centre has already initiated a detour from pure PLI plans in the Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS), where the government offered an incentive of 25 percent on capital expenditure for manufacturing.
The SPECS scheme, which was launched in April 2020 and ended on March 31, provided a financial incentive of 25 percent on capital expenditure.
In fact, the upcoming electronics component-manufacturing scheme, with an outlay of around Rs 40,000 crore, is also unlikely to be a pure PLI scheme, the official said.
The reasons
The change in approach comes as less than 10 percent of the funds allocated in the PLI scheme have been utilised since its inception, the official told Moneycontrol.
The government has committed around Rs 1.97 lakh crore for various PLI schemes for a period of 5 years starting 2021-22 to help bring scale and size in key sectors, create and nurture global champions and provide jobs to youth.
According to the official, it may take at least another five years to fully exhaust the funds allocated for the flagship PLI scheme.
“Only around Rs 11,000 crore so far has been exhausted out of the allocation of Rs 1.97 lakh crore, largely on electronics, therefore now the focus will be more on individual schemes for sectors rather than expanding the PLI to more of them,” the official added.
The PLI scheme has had quite a mixed journey so far. While sectors like large-scale electronics manufacturing have seen unparalleled success, others such as steel and textiles are laggards.
Automobiles, large-scale electronics, textiles, white goods, specialty steel, and solar photovoltaic (PV) modules are among the 14 crucial sectors brought under the output-linked incentive scheme’s ambit.
The shift also comes when India’s GDP growth slumped to its lowest level in seven quarters at 5.4 percent in the second quarter of FY25 as manufacturing and utility services took a hit.
Manufacturing slowed down drastically to 2.2 percent in the second quarter of FY25 from 7 percent in April-June.
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