Promoting PLI for White Goods

The Indian government approved the Production Linked Incentive (PLI) scheme for White Goods in April 2021 to spur local manufacturing and exports in air conditioners as well as LED lights and fixtures. Administered by the Department for Promotion of Industry and Internal Trade, the ₹6,238-crore scheme aims to incentivize incremental sales from India so the nation becomes part of sophisticated global supply chains.

Target Sectors

The PLI specifically targets two major segments under the broader white goods sector:

• Air conditioners: Room ACs, Light Commercial ACs, VRF ACs, Chillers, Variable Refrigerant Compressors etc. Target companies: Daikin, Hitachi, Blue Star etc.
• LED Lights: LED Lamps, LED Luminaires including Tube Lights and Downlights/Spotlights used primarily for general lighting purposes. Target companies: Havells, Syska, Crompton etc.

These domains hold immense potential for import substitution as India relies heavily on overseas finished goods or inputs like compressors and chipsets currently.

Scheme Objectives

The overarching objectives driving the introduction of dedicated PLI support for white goods manufacture are:

• Enhancing domestic value addition thereby reducing imports of final products
• Improving cost competitiveness to expand exports given existing disadvantages
• Creating robust component manufacturing ecosystem locally through integrated supply chains
• Boosting job creation given higher labor intensity

The incentives are designed to enable firms overcome disabilities, achieve scale and integrate with global value networks.

Key Objectives of PLI for White Goods

Scheme Incentives

• Companies can get incentives of 4-6% on incremental sales of domestically manufactured ACs and LED lights over base year 2019-20
• This fiscal support effectively subsidizes overhead expenses like power, logistics and workforce
• For AC makers, the incentive rate is 6% in Year 1, 5% in next 3 years and 4% in last year
• For LED firms, incentive rate is 6% for 5 years provided minimum thresholds are met

Eligibility Criteria

The key criteria for qualifying include:

Date of Incorporation

• Firms incorporated on or after 1-1-2015 are eligible
• 50% higher incentive if incorporated after 1-1-2020

Incremental Investment

• AC makers: Minimum ₹125 crore each in Year 1 and 2
• LED makers: Minimum ₹95 crore each in Year 1 and 2

Incremental Sales Value

• AC makers: Minimum threshold is cumulative ₹600 crore over 5 years
• LED makers: Minimum threshold is cumulative ₹300 crore over 5 years

MSME consortiums approved for India LED Programme can secure matching equity grants up to ₹40 lakh for prototyping and localization solutions after securing orders from anchor customers/buyers.

PLI Rationale

The PLI for white goods targets air conditioners and LED lighting which display high import reliance currently:

• India imports over USD 300 million worth of ACs annually with 15% coming from China
• 25% of India’s $1.8 billion domestic LED market constitutes imports as local firms lack access to chipsets

With support for technical knowhow and integrated supply chains, India can reduce import dependency and build export competitiveness. The PLI can enable:

• Joint ventures for establishing AC compressor and controller fabrication units through technology transfer
• Local manufacturing of LED chipsets instead of importing from East Asia

This price incentive for incremental production empowers creation of capacities allowing firms to leverage economies of scale estimated at:

• 20 lakh ACs per annum potential capacity over 5 years
• LED production touching 60 crore units per annum by 2025

Resultant gains by effectively implementing PLI include:

• 30% import substitution in ACs and LEDs through localized manufacturing.
• 5X growth in exports crossing ₹64,000 crore in 5 years per targets.
• 1 lakh additional jobs creation across ecosystem.