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Production Linked Incentive scheme

Production Linked Incentive scheme

The government aims to expand the ambit of the production-linked incentive (PLI) scheme to include as many as ten more sectors such as food processing and textiles other than the already included mobile phones, allied equipment, pharmaceutical ingredients and medical devices. Apart from cutting down on imports, the PLI scheme also looks to capture the growing demand in the domestic market.

Production linked incentive scheme:

  •  In order to boost domestic manufacturing and cut down on import bills, the central government introduced a scheme that aims to give companies incentives on incremental sales from products manufactured in domestic units.
  •  It inviting foreign companies to set shop in India.
  •  The scheme also aims to encourage local companies to set up or expand existing manufacturing units.
  •  So far, the scheme has been rolled out for mobile and allied equipment as well as pharmaceutical ingredients and medical devices manufacturing.
  •  These sectors are labour intensive.
  •  They would create new jobs for the ballooning employable workforce of India.
  •  The objective is to make India more compliant with our WTO (World Trade Organisation) commitments.
  •  Also to make it non-discriminatory and neutral with respect to domestic sales and exports.

Needed reform:

  •  The idea of PLI is important as the government cannot continue making investments in these capital intensive sectors as they need longer times for start giving the returns.
  •  Instead, what it can do is to invite global companies with adequate capital to set up capacities in India.

Sectors currently having the PLI scheme:

  •  The central government introduced the PLI scheme for mobile manufacturing as well as pharmaceutical ingredients and medical devices.
  •  As a part of the PLI scheme for mobile and electronic equipment manufacturing, an incentive of 4-6 per cent is planned for electronics companies which manufacture mobile phones and other electronic components such as transistors, diodes, thermistors, resistors, capacitors and Nano-electronic components such as micro electromechanical systems.
  •  Similarly, the PLI scheme for pharmaceutical ingredients and medical devices seeks that applicants will commit a certain amount prescribed by the government as investment to build capacities in these areas. 
  • The government will pay the companies it selects for the scheme a specific proportion of their turnover from making and selling the bulk drugs or medical devices as an incentive over the next few years.
  • The amount of the incentive would decrease as the years go by.
  • The PLI scheme for bulk drugs focuses on building economies of scale in over 50 critical active pharmaceutical ingredients, including penicillin G, vitamin B1, dexamethasone, meropenem, atorvastatin and aspirin.

Sectors are likely to be brought under the ambit of the PLI scheme in the coming days, reports have suggested that food processing, textiles, leather as well as battery manufacturing are likely candidates.

Source:”Indian Express”.