Govt expands Rs 1.45 trn PLI scheme to 10 key sectors, industry hails move

The scheme is in addition to the already announced Rs 51,311 crore PLI for three sectors which takes the total around Rs 2 trn

The Cabinet on Wednesday approved a Rs 1.45 trillion production-linked incentive (PLI) scheme for ten more sectors to attract investments, boost domestic manufacturing, enable companies to become part of the global supply chain and generate employment opportunities.

The sectors include advance chemistry cell (ACC) battery which is used in consumer electronics, electric vehicles, and renewable energy; electronic and technology products; automobiles and automobile components; pharmaceutical drugs; telecom and networking products; textile products; food products; solar PV modules; air conditioners,LEDs and speciality steel.

The scheme is in addition to the already announced Rs 51,311 crore PLI for three sectors -- mobile manufacturing and specified electronic components; bulk drugs and active pharmaceutical ingredients (API) and medical devices.

This has brought total incentives under the schemes to around Rs two trillion. The government is hopeful that PLI schemes would provide 200,000-300,000 direct employment over five years, sources said.

The five-year PLI for each of the ten sectors have been specified. The biggest of the incentives, at over Rs 57,000 crore, would be given for the automobile and automobile components sector followed by ACC battery at over Rs 18,000 crore.

Pharma products for which Rs 15,000 crore PLI was announced include patented drugs, biopharmaceuticals, phytopharmaceuticals (herbal), drugs not made in India, cell based or gene therapy products, orphan drugs (for very rare diseases) among others.

The scheme will be implemented by the respective ministries and departments and will be within the overall financial limits prescribed.

However, the final proposals of PLI for individual sectors will be appraised by the Expenditure Finance Committee (EFC) and approved by the Cabinet within 45 days, sources said.

As such industry players said they are waiting for fine prints to gauge the scheme.

Savings, if any, from one PLI scheme of an approved sector can be utilized to fund that of another approved sector by the empowered group of secretaries. Any new sector for PLI will require fresh approval of the Cabinet.

Briefing reporters after the meeting, finance minister Nirmala Sitharaman said,""We are yet again proving that the policy that we are taking up even in PLI through which we want manufacturers to come to India is clearly to say we want to build on our strength but yet link with the global value chains."

"... so this PLI is also aimed at getting investments into the country. The government is giving financial support that these financial incentives will make it attractive to produce in India and selection of sectors have been based on that," she said.

Pharma industry veterans like Pankaj Patel, chairman of Cadila Healthcare said the scheme is a step in the right direction. "Pharmaceuticals is a sector of strategic importance and thus any scheme that encourages indigenous research, high value product development is a welcome step. We are awaiting the finer details of the scheme, but we expect that this would also encourage innovation in India," he said.

PLI in ACs is aimed at cutting down over Rs 15,000-crore imports of AC components a year. Out of the Rs 22,000-crore AC market in India, only about 30 per cent value is added locally, according to estimates by industry bodies such as Consumer Electronics and Appliances Manufacturers Association (CEAMA).

So far as LED is concerned, nobody manufacturers LED panels that comprise over 60 percent of the cost of making any LED TVs. And it is a major bone of contention between the Indian and Chinese government as it continues to be imported. Since Covid pandemic impacted the supply chain, the price of these panels have gone up by up to 120 percent – hurting companies operating India (both global and local brands). In fact, all major brands, including Chinese ones, had to raise prices by 15-20 percent between July and September.

Kamal Nandi, President – CEAMA and business head & executive vice president – Godrej Appliances said,"CEAMA is committed to promoting domestic manufacturing of appliances and consumer electronics in the country. PLI will assist in the necessary boost to the ‘Make in India’ initiative and support India into becoming a manufacturing."

Textiles players said that small companies should also be brought under PLI.

Raja N Shanmugam, president of the Tirupur Exporters’ Association said that giving a thrust to grow the man made fibre (MMF) and technical textiles arena has a huge prospects.

"This is also designed to support incremental investments oriented turnover growth by big players only. Our suggestion is even the conventional exporter or manufacturer who hitherto were limited to cotton expands his products ranges into both MMF and technical textiles also to.be provided incentive support," he said.

On food products, PLI worth Rs 10,900 crore will be given for boosting the local food manufacturing in sectors like ready to eat, ready to cook (RTE/RTC), fruits & vegetables, honey, desi ghee, organic eggs and poultry meat, marine products etc.

According to some of the players in the food processing industry, except the RTE/RTC segment, the rest are relatively small and are primarily dominated by unorganized players. And the scope of incentivising or increasing scale of operation through the scheme is unclear.

The RTE/RTC category, however, is led by global majors like Nestle, Unilever, PepsiCo and ITC – especially in the snacking (chips etc.) and noodles, pasta, poha and pizza market. According to industry estimates, the RTC sector comprises over Rs 7,500 (US$ 1 billion) of yearly revenue, while RTE is well over Rs 22,000 crore (YS$ 3 billion) where Indian players like Haldiram’s and Balaji dominate.

(With inputs from Sanjeeb Mukherjee, Sohini Das, T E Narasimhan, Arnab Dutta and Indivjal Dhasmana)