NITI Aayog is presently developing a set of criteria to evaluate the value addition of companies benefitting from the Production-Linked Incentive (PLI) schemes. This comes into effect amidst latest news updates, where it has been reported that an empowered group of secretaries has been assigned to identify and resolve issues in the PLI schemes since June 2020. The group’s responsibilities range from coordination between states and companies for approvals, evaluation and encouraging quick investments in PLI schemes, and overall project turnaround.
The Empowered Group and its Function
The assembly of secretaries constituting this group is led by the Cabinet Secretary and includes significant positions like the CEO of NITI Aayog, the secretaries of Department for Promotion of Industry and Internal Trade, Department of Commerce, Department of Revenue, Department of Economic Affairs, and the Secretary of the relevant ministry.
NITI Aayog’s Plan for Centralised Data Monitoring
Under the leadership of NITI Aayog, steps are being taken towards the development of a centralised database for monitoring progress in the PLI schemes across various sectors. An external agency – potentially state-owned IFCI Ltd or SIDBI – is likely to be involved in designing and preparing the database. This database will document value addition, actual exports against pledges made, and job creation. Moreover, a dashboard will be devised to mark hindrances at the state level.
The Challenges Confronting the PLI Scheme
Currently, there exists no universal set of parameters to gauge the value addition by companies receiving or expected to receive incentives under the PLI scheme. With each ministry tracking the value addition of their respective PLI schemes independently, there seems to be no way to draw comparisons between different schemes. Additionally, issues arise from various deliverables such as job creation, export increment and quality improvement, which lack a centralised database for evaluation.
The Rigid Market Conditions for Incentives
Sometimes, the targets established by departments and ministries for companies to qualify for incentives are too stringent. Until the last fiscal, only 3-4 companies out of the approved fourteen managed to meet the incremental sales targets to qualify for the PLI scheme. Notably, most domestic companies are dependent on one or two supply chains, which are vulnerable to disruptions that could prevent the companies from qualifying for the incentive without any fault of their own.
Details about the PLI Scheme
The PLI scheme was established to amplify domestic manufacturing capability, with additional benefits of higher import substitution and employment generation. The government has allocated Rs 1.97 lakh crore for the PLI schemes in various sectors and an extra allocation of Rs 19,500 crore for PLI for solar PV modules in the 2022-23 budget.
Benefits under the PLI Scheme
Incentives under this scheme, calculated based on incremental sales, range from as low 1% for electronics and technology products to as high as 20% for the manufacturing of key starting drugs and certain drug intermediaries. Some sectors like advanced chemistry cell batteries, textile products, and the drone industry will have incentives calculated based on factors including sales, performance, and local value addition over five years.
Purpose and Sectors for the PLI Scheme
PLI schemes have been announced for 14 sectors – automobile and auto components, electronics and IT hardware, telecom, pharmaceuticals, solar modules, metals and mining, textiles and apparel, white goods, drones, and advanced chemistry cell batteries. This scheme was introduced to diminish India’s dependency on China and other foreign countries, support labour-intensive sectors, increase employment in India, and boost domestic production. The PLI scheme also invites foreign companies to establish units in India and encourages domestic businesses to expand their production units.
Last Modified: February 15, 2024