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Why not a dedicated PLI scheme for MSMEs, experts ask govt

The MSME sector is the second-largest employment creator, providing employment to an estimated 11 crore people. It contributes to 30 percent of the GDP and accounts for 48 percent exports. Still, the existing PLI schemes are meant only for the corporates, they say. If govt wants self-reliance in manufacturing, it is a must, they argue.

July 30, 2021 / 07:11 PM IST
The sectors that were initially selected included medical device manufacturing, pharmaceutical ingredients and mobile and equipment manufacturers. (Representative image)

The sectors that were initially selected included medical device manufacturing, pharmaceutical ingredients and mobile and equipment manufacturers. (Representative image)

In a recent Parliament response in Rajya Sabha, Micro, Small & Medium Enterprises (MSME) minister Narayan Rane said there is no proposal under consideration for a dedicated PLI (Production Linked Incentive) scheme for the MSME sector.

Rane was also asked if NITI Aayog was considering dividing the PLI scheme into two parts – a larger scheme for big companies with higher targets, and another for smaller ones.

“So far as NITI Aayog is concerned, as of now, there is no proposal under active consideration for a dedicated PLI scheme for the MSME sector," Rane said in a written response.

Earlier this year, there have been news reports suggesting that Niti Aayog is working on a dedicated PLI scheme for MSMEs.

The PLI scheme

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Under the PLI scheme, incentives are given to companies on the incremental sale of products manufactured in the domestic units. The scheme was introduced in March last year.

Apart from inviting foreign companies to set up manufacturing units in the country, the scheme also encourages local companies to expand production and manufacturing in India. Furthermore, the scheme is expected to cut down import bills, reduce dependency on China and absorb the country’s growing workforce.

Speaking to Moneycontrol, Vinod Kumar, President, India SME Forum, said: "If the government wants to accentuate Atmanirbharta (self-reliance) in manufacturing, it must announce a PLI scheme for MSMEs, which are into manufacturing. India has a huge import bill, and a dedicated PLI is the best option to offset it as it would not only cut imports, but also create more jobs."

"The inclusion of traders in MSMEs would only encourage imports. So until an incentive is provided, units would prefer to import instead of producing. So far the PLIs announced are aimed only at large corporates, which anyway enjoy a lot of benefits in the form of tax breaks, etc.,” Kumar added.

The MSME sector in India is said to be the second-largest employment creator after agriculture, providing employment to an estimated 11 crore people. It contributes to 30 percent of the GDP and accounts for 48 percent exports.

Ramamurthy, member, All India Council of Association (AICA) of MSMEs, which represents 170 MSME associations across the country, said: "I am not aware how much the PLI scheme has benefited the sectors it has been announced for. However, given that MSMEs are vast and present across sectors, the government can consider bringing a similar scheme to MSMEs.”

Employment-Linked Incentive Scheme mooted

"For example, an Employment-Linked Incentive Scheme (ELIS) for MSMEs, in which MSMEs would be given incentives based on the employment they have generated, would not only lead to job creation but also give a fillip to domestic manufacturing,” he noted.

Mohit Jain, Chairperson, MSME Committee, PHD Chamber of Commerce & Industry concurred.

Jain said that the PLI scheme have been announced for specific sectors and industries.

The government should look at bringing a similar scheme to PLI where MSMEs are given incentives based on the employment generation and the import substitution they do which is what the PLI does, he added.

Ranjeet Mehta, a policy expert said: "The government should consider a PLI scheme for MSMEs as this is where the bulk of manufacturing happens. A lot of MSME associations are keen and have expressed interest to the government that PLI schemes should be announced for small units as it would not lead to job creation but also give a boost to exports."

The sectors that were initially selected included medical device manufacturing, pharmaceutical ingredients and mobile and equipment manufacturers.

Later, the Union cabinet approved the PLI scheme for 10 sectors -- pharmaceuticals, automobiles and auto components, telecom and networking products, advanced chemistry cell battery, textile, food products, solar modules, white goods, specialty steel, and electronic technology products.

Finance Minister Nirmala Sitharaman, in the Union budget 2021-22 speech, had announced an outlay of Rs 1.97 lakh crore for PLI schemes for 13 sectors to boost manufacturing and generate employment opportunities.
Shreeja Singh
first published: Jul 30, 2021 06:44 pm
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