PLI scheme overhaul plan includes quarterly disbursals, addition of vaccines, chemicals

Commerce Minister Piyush Goyal

From moving to quarterly disbursement of incentives to adding new sectors such as chemicals and vaccines, India is planning to rollout a string of changes to its flagship production-linked incentive (PLI) scheme with an aim to expand the success of the plan beyond large-scale electronics, a government official told Moneycontrol.

Launched in 2020, the PLI scheme has had quite a mixed journey. While, sectors like large-scale electronics manufacturing have seen unparalleled success, others such as steel and textiles are laggards.

The official said that changing the disbursement to quarterly from annual (as is done in the case of few sectors under PLI such as electronics and pharmaceuticals) already should ensure a broad-based pick up in utilisation across all sectors.

"PLIs for smartphones and pharma have quarterly disbursement so we are insisting that should be expanded to all 14 sectors. General consensus is to pay the company as early as possible to mirror the same success," the official added.

Beyond tweaking disbursement timelines, the government is also looking at overhauling PLIs in schemes such as textiles and speciality steel that have not picked up as much as anticipated.

Especially for textiles, the plan is to add more products such as garments under the scheme worth nearly Rs 11,000 crore as it has failed to boost exports so far.

"We are coming up with solution for textiles that new products should be added. More products can be included against the specific HSN codes that are under PLI, a strategy that hasn’t succeeded," the official said.

At present, only certain products such as textiles used for defence and construction get the benefit of the PLI scheme for textiles.

Last month, Textiles Minister Giriraj Singh said the government has approved over Rs 10,000 crore and is considering extending the PLI scheme for textiles to the garments sector with a view to boosting domestic manufacturing and exports.

New sectors
The government is also mulling bringing new sectors into the fold of the PLI scheme such as toys, footwear, chemicals, and vaccine.

Apart from this, there are plans to bring in another PLI scheme for electronics that has been one of the most successful sectors in the incentive-linked plan.

In fact, thanks to the PLI scheme for electronics, India's mobile phones production increased by more than 125 percent in FY23, while exports rose four times since FY 2020-21.

"No new PLI has come in for the last two years. The view at the top is to let the PLI scheme stabilise, maybe in the Budget announcements for one or two new sectors. The government is in dilemma which new areas to include in the production linked incentive plan. One view is to take only high-tech sectors, another is to focus on job creating sectors," the official added.

The PLI scheme that now covers 14 sectors including telecommunication, white goods, textiles, manufacturing of medical devices, automobiles, speciality steel, food products, high-efficiency solar PV modules has an outlay of Rs 1.97 lakh crore.

In the interim budget the allocation for the PLI scheme for 2024-25 was hiked to Rs 6,200 crore, up 33 percent from FY24's Budget estimate of Rs 4,645 crore.

In FY24, around Rs 6,000 crore was been disbursed to beneficiaries under the PLI scheme, while cumulatively the figure stood at Rs 9,700 crore, Rajesh Kumar Singh, secretary in the Department for Promotion of Industry and Internal Trade (DPIIT) had said back in April.

According to an official statement released in January 2024, PLI schemes saw an investment of over Rs. 1.03 lakh crore till November 2023, leading to production or sales of Rs 8.61 lakh crore and employment generation (direct & indirect) of over 6.78 lakhs.

However, disbursals were at a much lower Rs 4,415 for eight sectors, including Large-Scale Electronics Manufacturing (LSEM), IT hardware, and pharmaceuticals until November 2023 during FY24.

The official cited above said, that the investment and production targets have been more or less in sync. The challenge has been meeting disbursement and employment aims under the PLI scheme.

"Given that investment and production targets have been in sync, naturally disbursement will follow with a lag of one year or so and then employment. Out of the 14 PLI schemes, two to three are yet to take off especially the one pertaining to solar PV modules," the official said.

The PLI scheme under the National Programme on High Efficiency Solar PV Modules, aimed at achieving domestic manufacturing capacity of Giga Watt (GW) scale in High Efficiency Solar PV modules and solar PV cells, has an outlay of Rs 24,000 crore.