PLI scheme to be expanded to furniture, leather sectors as MEIS wounds up

The government proposes to expand the scope of the production linked incentive (PLI) scheme to five or six more more sectors, including air conditioners and TV sets, leather, chemicals, furniture, tyres and toys, in a bid to boost manufacturing in the country.

Government sources said that the Finance Ministry, along with the Commerce and other ministries, are finalising the contours of the PLI scheme for each identified area of manufacturing and an announcement could be made over the next few weeks.

The PLI scheme for new sectors would be similar to the ones announced by the Electronics Ministry for development of a mobile manufacturing ecosystem in the country and another Rs 7,000 crore scheme by the Chemicals and Petrochemicals Ministry for the pharmaceutical sector for manufacturing bulk drugs and active pharmaceutical ingredients (APIs).

The new scheme would replace the existing Merchandise Exports India Scheme (MEIS), introduced in April 2015, with the objective to promote manufacturing and exports of specified goods from India. But this scheme did not yield the desired result. Even with its liberal application across sectors, exports remained nearly stagnant, so the government now wants to wind it up by December.

The liability under MEIS ballooned from Rs 20,000 crore to about Rs 45,000 crore in 2019-20, reaching an unsustainable level. However, during the period, the country's exports remained range-bound. In 2014-15, Indian exports were $310 billion and in 2019-20, the export figure was $313 billion. So, the Finance Ministry has restricted MEIS benefits to just Rs 9,000 crore in FY21 and plans to use the savings for the sector focused PLI scheme, sources said.
 

"The focused and efficient scheme like PLI has been identified as part of 'Aatmanirbhar Bharat' mission that aims to work on import substitution and enhance domestic manufacturing. Five more sectors may be added under PLI soon," said a top government source not willing to be named.

The government is looking at expanding the PLI scheme to boost manufacturing of air conditioners and TV sets where some level of manufacturing exists in the country but a lot of components are still imported. The PLI will ensure that the complete ecosystem around the product category develops locally.

A similar scheme is also on the anvil for expanding domestic manufacturing of solar equipment that currently is largely imported from China.

Similarly, the Department for Promotion of Industry and Internal Trade (DPIIT) has identified sectors such as tyres, chemicals, furniture, and toys that have the potential to develop local scale to expand the reach of 'Made in India' goods across the globe.

The PLIs for several sectors would be ready before the end of 2020. The existing PLI for mobile manufacturing offers incentives to the tune of 4-6 per cent for incremental investment and sales over a period of five years to companies. Similar schemes could be worked for new sectors but the quantum of benefit would depend on capital intensity of an industry.