Production Linked Incentive (PLI) Scheme: Introduction

The Central government’s ambitious Production-linked Incentive (PLI) scheme has increased investment prospects in domestic manufacturing. The scheme has been launched in 13 sectors identified by the government with a total outlay of around 2 lakh crore.The Production Linked Incentive Scheme (PLI) for large scale electronics manufacturing proposes a financial incentive to boost domestic manufacturing and attract large investments in the electronics value chain including mobile phones and specified electronic components.In the Union Budget 2021-22, presented on 1^st February 2021, the Finance Minister announced an outlay of 1.97 Lakh Crores for the Production-Linked Incentive (PLI) Schemes for 13 key sectors, to create national manufacturing champions and generate employment opportunities for the country’s youth. This means that minimum production in India as a result of PLI Schemes is expected to be over US$ 500 billion in 5 years. PLI Schemes are a cornerstone of the Government’s push for achieving an ‘Atmanirbhar Bharat’.

The electronics Industry permeates all sectors of the economy and has cross-cutting economic and strategic significance. Recognizing the sector's unique dynamics, significant opportunities, and structural challenges, the Government of India notified the National Policy on Electronics (NPE) 2019 on 25.02.2019.One of the objectives of NPE 2019 is to promote domestic manufacturing in the entire ESDM value chain for economic development to achieve a turnover of over 30,00,000 crore (USD 400Billion) by 2025. This will include targeted production of 100 crore mobile phones, valued at over 14,25,000 crore (USD 190 Billion) by 2025.

What is the Production Linked Incentive (PLI) scheme?

The Production-linked Incentive is a conventional and popular strategy used by governments to boost the production of goods considered necessary for job creation, social welfare and taxation. PLIs are essentially financial incentives for businesses to augment their output. They could come in the form of tax rebates, lowered import and export duties or easier land acquisition norms.The benefits of a PLI scheme are generally passed on to the end consumers of goods in the form of lower costs. For instance, the PLI scheme for large-scale electronics manufacturing in India offers incentive to promote domestic manufacturing and draw significant investments in mobile phone manufacturing and distinctive electronic components like the ATMP (Assembly, Testing, Marking and Packaging) units. The scheme will have a huge positive impact on the electronics manufacturing segment and will support the country to establish itself as a global leader in the segment.

Similarly, while electric vehicles (EVs) do not have an immediate demand, a shift to greener vehicles is necessary for the country's future. The government has a programme called the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME) scheme to drive the adoption of electric-powered vehicles.There are numerous benefits for EV manufacturers under this scheme including a direct subsidy to consumers who purchase an EV.Some of the identified sectors for PLI scheme are electronic or technology products, high-efficiency solar modules, specialty steel, pharmaceutical drugs, telecom & networking products, food products, automobile and auto components, textile manufacturing and advanced chemistry cell battery.

Background

During the COVID-19 pandemic, it was clearly visible that most of the countries around the world including India were overly dependent on a single country for electronic hardware and components imports. Sudden events can cause a large-scale shortage of electronic components and disrupt manufacturing.It is important to promote indigenous production and reduce dependency on a single market or geographical region. The PLI Scheme was rolled out to effectively integrate India’s manufacturing capabilities with the demands of global supply chains and to promote domestic value addition and exports.The scheme aims to position India as a global hub for Electronics System Design and Manufacturing (ESDM) by encouraging and driving capabilities in the country for developing core components, including chipsets, and creating an enabling environment for the industry to compete globally.

What are Production Linked Incentive Schemes and How Will They Improve India’s Manufacturing Capacity?

Production linked incentive (PLI) schemes were first introduced in India in March 2020, targeting three industries –

The PLI concept has since expanded with schemes rolled out for multiple sectors to boost India’s manufacturing capabilities and encourage export-oriented production. The PLI schemes aim to develop capacities in the local supply chain, introduce new downstream operations, and incentivize investments into high-tech production.As of November 2021, the PLI schemes covered 13 sectors with a total budgeted outlay of 1970 billion (US$26.48 billion). Each PLI scheme is applicable for a four to six-year duration period, depending on the sector. The table below lists the sectors that will benefit from the PLI scheme. They include sunrise sectors, labor-intensive sectors, and those industries where India wants to develop links to the global value chain.

Benefits of the scheme

Target Segments under PLI Scheme

Target Segments under PLI shall mean two segments viz. Mobile phones and Specified Electronic Components as mentioned below:

Applicant under the Scheme

Applicant for the purpose of the Scheme is a company registered in India, proposing to manufacture goods covered under Target Segments in India, and making an application for seeking approval under the Scheme. The applicant can operate new or existing manufacturing facility (ies) to manufacture goods covered under the Target Segments (i.e. mobile phones and specified electronic components). The aforesaid manufacturing can be carried out at one or more locations in India.

Qualification Criteria under PLI Scheme

Qualification Criteria for applicants under different Target Segments in the Scheme are as defined:

Consolidated global manufacturing revenue

In case the manufacturing revenue, in the target segment, of an entity (Group Company) is claimed and considered for two or more applicant companies, the manufacturing revenue of such entity in the target segment will be equally divided among the applicants that are claiming revenue of such entity. Only such share of manufacturing revenue in the target segment, that is obtained after division of manufacturing revenue of that entity (group company), will be considered for determining qualification for such applicant under the scheme.

If the Consolidated Global Manufacturing Revenue of the applicant company (including Group Companies) is available in a currency other than INR, the INR equivalent amount may be computed by applying an average if the Consolidated Global Manufacturing Revenue of the applicant company (including Group Companies) is available in a currency other than INR, the INR equivalent amount may be computed by applying an average.

Eligibility for the scheme

The applicant company will have to meet both threshold criteria i.e. incremental investment and incremental sale of manufactured goods over the base year to be eligible for disbursement of incentive under the scheme for a given year.Eligibility under the Scheme shall be subject to thresholds of Incremental Investment and Incremental Sales of Manufactured Goods (covered under Target Segments) over the base year as defined. An applicant must meet threshold criteria to be eligible for disbursement of incentive for the year under consideration. To meet the threshold criteria of Incremental Investment for any year, the cumulative value of investment done till such year (including the year under consideration) over the Base Year (2019-20) shall be considered. In order to meet the threshold criteria of Incremental Sales of Manufactured Goods covered under Target Segments for any year, the Total Sales of Manufactured Goods covered under Target Segments for such year over the Base Year, irrespective of Invoice Value (whether below or above 15,000 in case of Mobile Phones) shall be considered.

In order to meet the threshold criteria of Incremental Sales of Manufactured Goods covered under Target Segments for any year, the Total Sales of Manufactured Goods covered under Target Segments for such year over the Base Year, irrespective of Invoice Value (whether below or above 15,000 in case of Mobile Phones) shall be considered.Eligibility criteria for businesses under the PLI scheme vary based on the sector approved under the scheme. For instance, the eligibility for telecom units is subject to the achievement of a minimum threshold of cumulative incremental investment and incremental sales of manufactured goods. The minimum investment threshold for MSME is 10 crore and 100 crores for others.

Under food processing, SMEs and others must hold over 50 % of the stock of their subsidiaries, if any. The selection of SMEs is based on “their proposal, uniqueness of the product and the level of product development, etc.,” according to the Ministry of Food Processing Industries. On the other hand, for businesses under pharmaceuticals manufacturing, the project has to be a greenfield project while the net worth of the company should not be less than 30 % of the total committed investment. Moreover, the proposed Domestic Value Addition (DVA) of the company should be at least 90 % in the case of fermentation-based product and at least 70 % in the case of chemical synthesis-based product.In case an applicant does not meet threshold criteria for any given year, the applicant shall not be eligible for incentive in that particular year. However, the applicant will not be restricted from claiming incentive in subsequent years during the tenure of the Scheme, provided eligibility criteria are met for such subsequent years.For example, if an applicant company is not able to achieve threshold Incremental Sales of Manufactured Goods between 01.08.2020 and 31.03.2021, they will not be eligible for incentive in Year 1. However, this will not impact eligibility for any subsequent year. They will be able to claim the incentive for subsequent years provided eligibility is met for the years under consideration. Individuals should know that eligibility parameters may differ in the selected sectors. For instance, the PLI scheme for automobile sector eligibility may slightly vary from the one in the electronics sector.In this regard, checking the official website would be beneficial. Nevertheless, the general eligibility requirements are as follows:

The eligibility for telecom units depends on the brink of collective incremental investments and sale of produced goods.
SMEs and other enterprises must hold 50% of their stock of subsidiaries in the food processing sector.
In the case of pharmaceuticals manufacturing, a company's net worth should not be below 30% of total investment. This project should fall under the Greenfield project.
For fermentation-based goods, the DVA or Domestic Value Addition needs to be at least 90%.
DVA of chemical synthesis-based products should be nearly 70%.

In cases where the same rank has been secured by the eligible companies, the final selection shall be based on the following rules (in the following descending order)

Eligible company committing to upfront investments shall be given priority as indicated in PLI Scheme document.
Eligible company who has applied first shall be given priority over others, all else being equal.

The number of selected applicants in each product sub-category shall be limited by the cumulative unit capacity during PLI Scheme period by the eligible candidates to match the projected production at the end of the final year of the scheme.

Eligibility Criteria for Selection

Companies or JV, registered in India under the Companies Act 2013, ensuring end-to-end manufacturing of applied product sub-category domestically.
Third party outsourcing is allowed upto 20% value addition.
Applicants whose accounts are declared as NPA as per RBI guidelines or willful defaulter or reported as fraud by any bank, financial institution or non-banking financial company etc. would be considered ineligible. Further there should not be any insolvency proceedings admitted against the applicant in NCLT, etc.
The net worth of the company (including that of the group companies)/JV, in immediate preceding financial year of the date of application submission, shall not be less than 30% of the total committed investment across all the applied product sub-categories.
In case of new company/group companies/JV incorporated after 31/03/2021 i.e. in FY22, net worth for such company (ies) shall not be less than 30% of the total committed investment across all the applied product sub-categories, prior to the date of filing of application.
Qualifying eligibility thresholds value- respective product sub-category-wise :

Minimum Investment to be made in line with the List of permissible investments.
Minimum Unit capacity to be installed.
Minimum Annual incremental production rate.

Each applicant shall commit investment against each applied product sub-category during PLI Scheme period after the date of gazette notification along with year-wise phasing of investment. The committed investment by applicant against a particular sub-category has to be equal or more than the minimum unit investment specified.

For simultaneous installation of two units with single combined investment, the committed investment by the applicant has to be equal or more than the 1.8 times of unit investment specified in the scheme document.
For simultaneous installation of three units with single combined investment, the committed investment by the applicant has to be equal or more than the 2.5 times of unit investment specified in the scheme document.

In case an applicant applies for more than one unit (say, 2 units or 3 units, etc.) at different locations, each unit shall be evaluated independently.

Production Linked Incentive Schemes in India: Target sectors and incentives

S. No.	Sectors	Implementing Ministry/ Department	Incentives	Description
1.	Mobile manufacturing and specified electronic component (large scale electronics manufacturing)	Ministry of Electronics and Information Technology (MeitY)	4% to 6% for a period of 5 years	The scheme proposes a financial incentive to boost domestic manufacturing and attract large investments in the electronics value chain including electronic components and semiconductor packaging. Under the scheme, electronics manufacturing companies will get an incentive of 4 to 6% on incremental sales (over base year) of goods manufactured in India for a period of next 5 years. The scheme shall only be applicable for target segments – mobile phones and specified electronic components. With the help of the scheme, domestic value addition for mobile phones is expected to rise to 35-40% by 2025 from 20-25%. It shall also generate 8 lakh jobs more, both direct and indirect. The scheme would be a boost for semiconductor and display manufacturing in the country. Due to the global semiconductor shortage, Indian automakers and tech companies are facing problems. The scheme focuses on producing semiconductors over the next 5-6 years. Investment made by the companies approved under the PLI Schemes for large scale electronics manufacturing after 1^st April, 2021 is approximately 30 billion. After the success of the First Round of PLI Scheme, the Second Round of PLI Scheme has been launched on 11.03.2021, which focuses on building a vibrant and robust electronic component manufacturing ecosystem. The last date for application was 31.03.2021. Under the Second Round, incentive of 5% to 3% shall be extended on incremental sales (over base year, i.e., 2019-20) of goods manufactured in India and covered under the target segment, to eligible companies, for a period of four years. Applications received under the Second Round of PLI Scheme for Large Scale Electronics Manufacturing are in the process of appraisal. The PLI Scheme for Large Scale Electronics Manufacturing also focuses on building a vibrant and robust electronic components manufacturing ecosystem. This step will further strengthen product manufacturing in India for multiple sectors such as IT Hardware, LED Products, Automotive, Medical Devices, Solar Cells, Energy Storage, etc. for which other PLI Schemes are going to be implemented. Over the next five years, the Scheme is expected to lead to a total production of about 10.5 lakh crore. More than 60% of production is expected to be exported. The scheme is also expected to bring in additional investment of 11,000 crore. Value addition is expected to go up from 20-25% presently to 35-40% by 2025. The scheme will generate approximately 2 lakh direct employment opportunities in next 5 years along with creation of additional indirect employment of nearly 3 times the direct employment.
2.	Manufacturing of medical devices	Department of Pharmaceuticals	5% for a period of 5 years	The Indian Government has identified medical devices as a priority sector for the flagship ‘Make in India’ program and is committed to strengthening the manufacturing ecosystem. The PLI phase one of this scheme has been completed and phase two has been announced. The eligible medical device segments under this scheme include: Cancer care / radiotherapy: Brachytherapy systems, rotational cobalt machine, radiotherapy simulation systems, linear accelerator (linac), proton therapy system, etc. Radiology, imaging and nuclear imaging devices: CT Scan, MRI, ultra-sonography, X-ray equipment, mammography, C-arm, Cath-Lab, positron emission tomography (PET) Systems, single-photon emission tomography (SPECT), cyclotrons, etc. Anesthetics, cardio-respiratory and renal care: Needles-anesthesia, syringes-anesthesia, anesthesia workstation, anesthesia unit gas scavengers, anesthesia kits, masks —anesthesia, anesthesia unit vaporizers, anesthesia unit ventilators, automated external defibrillators (AEDs), dialyzer, dialysis machine, peritoneal dialysis kits, etc. All implants: Cochlear implants, hip implants, knee implants, spinal and neuro-surgical implants, urogynecologic surgical mesh implants, hernia surgical mesh implants, cerebral spinal fluid (CSF) shunt systems, implanted pacemakers, insulin pump, implanted neuro-stimulated device like deep brain stimulator, intraocular lenses, heart valves, stents etc. With an objective to boost domestic manufacturing, attract large investment in Medical Device Sector, the Department of Pharmaceuticals had launched a Production Linked Incentive (PLI) Scheme for Promotion of Domestic Manufacturing of Medical Devices to ensure a level playing field for the domestic manufacturers of medical devices with a total financial outlay of 3,420 crore for the period 2020-21 to 2027-28. In total 28 applications has been received spread across the 4 Target Segments for the PLI schemes for Medical Devices from all over the country. Out of these, 14 applications have been approved by the Government, with a total Committed Investment of 873.93 crore; Maximum Incentive proposed for disbursement: 1,694 crore and Expected Employment Generation of about 4212.
3.	Critical key starting materials (KSM)/ drug intermediaries (DI) and active pharmaceutical ingredients (API)	Department of Pharmaceuticals	5% to 20% for a period of 6 years	With an objective to attain self-reliance and reduce import dependence in these critical Bulk Drugs - Key Starting Materials/ Drug Intermediates and Active Pharmaceutical Ingredients in the country, the Department of Pharmaceuticals had launched a Production Linked Incentive (PLI) Scheme for promotion of their domestic manufacturing by setting up greenfield plants with minimum domestic value addition in four different Target Segments (In Two Fermentation based - at least 90% and in the Two Chemical Synthesis based – at least 70% ) totaling 41 products with a total outlay of 6,940 crore for the period 2020-21 to 2029-30. In total 215 applications were received for 36 products spread across four target segments for the PLI Scheme for Bulk Drugs (PLI Phase 1.0). Out of these, 47 applications have been approved by the Government of India, with a total committed investment of 53.66 billion. The maximum incentive proposed for disbursement is 60 billion and expected employment generation will be worth 121.40 billion.
4.	White Goods (ACs & LEDs)	Department for Promotion of Industries and Internal Trade (DPIIT)	4% to 6% for a period of 5 years	Total incentives applicable under the PLI scheme for white goods (Air Conditioners and LED Lights) will cost the government 62.38 billion (US$831.27 million). The target segments under air conditioners are: Air conditioners (components – high value intermediates or low value intermediates or sub-assemblies or a combination thereof) High value intermediates (copper tubes, Low value intermediates (PCB assembly for controllers, BLDC motors, service valves, and cross flow fans for AC and other component The target segments under LED include: LED lighting products (core components like LED chip packaging, registers, ICs, fuses, and large-scale investments in other components) Components of LED lighting products (like LED chips, LED drivers, LED engines, mechanicals, packaging, modules, wire wound inductors, and other components) Scheme is designed to create complete component ecosystem in India and make India an integral part of the global supply chains. The scheme will be instrumental in making manufacturing in India globally competitive by removing sectoral disabilities, creating economies of scale and ensuring efficiencies. The scheme is expected to attract global investments, generate large scale employment opportunities and enhance exports substantially. It will also lead to investments in innovation and research and development and upgradation of technology. The Scheme is expected to be instrumental in achieving growth rates that are much higher than existing ones for AC and LED industries, develop complete component eco-systems in India and create global champions manufacturing in India. A number of global and domestic companies, including a number of MSMEs are likely to benefit from the Scheme. This would also include disseminating mailers to the Embassies of India in home countries of identified global majors in ACs and LED Lights industry. This would be followed by Workshops/ Webinars by CII, FICCI, ASSOCHAM, RAMA, CEAMA and ELCOMA for raising awareness about the scheme. As per the Industry, the Value addition for AC Industry will increase from current level of 20-25% to 75% and for LED Lights Industry from 40% to 70-75%; This would also result in starting manufacturing of components or sub-assemblies which are not manufactured in India presently. It is estimated that over the period of five years, the PLI Scheme will lead to: - incremental investment of 7,920 crore; incremental Production worth 1,68,000 crore; exports worth 64,400 crore ;earn direct and indirect revenues of 49,300 crore and create additional four lakh direct and indirect employment opportunities.

S. No.	Sectors	Implementing Ministry/ Department	Incentives	Description
5.	Telecom & Networking products	Department of Telecommunications	4% to 7% for a period of 5 years	Approved with an outlay of 121.95 billion (US$1.64 billion). Recognizing the need for additional support to MSME units, it allows them additional incentives in the initial years. The list of target products include core transmission equipment, 4g/5g, next generation radio access network and wireless equipment, access & customer premises equipment (CPE), internet of things (IoT) access devices and other wireless equipment, enterprise equipment: switches and other products as may be decided by empowered group of secretaries. A total of 31 companies – 16 MSMEs and 15 non-MSMEs (eight domestic companies and seven global companies) have been found eligible by the Department of Telecommunications (DoT) under the PLI scheme. These 31 PLI beneficiaries are expected to invest US$447 million in the next four years and generate incremental employment for more than 40,000 people. Investments made by successful applicants from April 1, 2021 onwards and up to FY 2024-25 are eligible for PLI benefits, subject to qualifying incremental annual thresholds. The PLI scheme seeks to boost research and development of new products on which 15% of the committed investment could be directed. The investor will be incentivized for incremental sales up to 20 times the committed investment enabling them to reach global scales and utilize their unused capacity and ramp up production. The core component of this Scheme is to offset the huge import of telecom equipment worth more than 50 thousand crores and reinforce it with “Made in India” products both for domestic markets and exports. The target is to Make India a preferred global manufacturing destination for telecom products and making India a net exporter of telecom and networking products. An extensive outreach program with the support of Invest India team for the Scheme is being planned, covering – One to one meeting with potential investors; Participation in global outreach events organized by industry associations; Webinars with Consultants & Embassy officials, Law firms/ banks/ research organizations/ industry associations; Creation of collaterals/ flyers for the scheme in different languages; Microsite for the scheme on Invest India website; Separate interactive website for Applications as well as selected vendors for the entire Scheme interface; Support translation of scheme into multiple languages. The Scheme is investment linked which will enable the vendors to invest in backward integration thereby increasing the value addition in country. Global vendors will bring in their component suppliers and develop ancillaries. The scheme has a special category for MSME recognizing the fact that MSMEs play an important role in the telecom manufacturing ecosystem. For MSMEs, one percent (1%) higher incentive is proposed in initial 3 years. Minimum Investment threshold for MSME has been kept at 10 crore. It is estimated that full utilization of the Scheme funds is likely to lead to incremental production of around 2.4 Lakh crore with exports of around 2 Lakh crore over 5 years. It is also expected that Scheme will bring investment of around 3,000 crore and generate huge direct and indirect employment.
6.	Electronic and IT hardware/ Technology products	Ministry of Electronics and Information Technology	1% to 4% for a period of 4 years	It includes products like mobile phones, specified electronic components, laptops, tablets, all-in-one PCs, servers, etc. Electronics manufacturing: The budget outlay for this scheme is 400 billion (US$5.38 billion). IT hardware: The budget outlay for this scheme is 73.25 billion (US$984.68 million). The Global outreach plan mainly includes a two pronged approach. Identification and focused approach to Global Champion companies - The decision makers of global champion companies are identified and reach out is done through various channels, e.g., Indian Embassies abroad, Foreign Embassies in India, Electronics Industry Associations, Bank networks, Consultants, Supply chain companies, etc. One-to-one physical or VC meetings are conducted at various levels involving Minister, Secretary and Joint Secretary MeitY. The relevant materials, viz., Scheme Notification and Guidelines are translated into foreign languages (Korean, French, German, Mandarin, Japanese, Hebrew, etc.) and are shared with relevant stakeholders for wider dissemination. Promotion of the schemes through relevant stakeholders to reach a greater audience - Various Webinars, Round table and Panel discussions are organized through various stakeholders, like Indian Embassies abroad, Foreign Embassies in India, Electronics Industry Associations, OEMs and their Supply chain partners, Banks and consultant networks, etc. where details of the schemes are explained through Presentation and Q & A sessions. This approach helps in reaching out to new companies. Over the next 4 years, the PLI Scheme for IT Hardware is expected to lead to total incremental production of up to 3,26,000 crore, out of which more than 75% is expected to be exported. Also, it is expected that Domestic Value Addition for IT Hardware will rise to 20% - 25% by 2025 from the current 5% - 10%, due to the impetus provided by the scheme. The scheme will generate approximately 1.8 lakh employment opportunities in next 4 years. The Scheme shall, extend an incentive of 4% to 2% / 1% on net incremental sales (over base year i.e. 2019-20) of goods manufactured in India and covered under the target segment, to eligible companies, for a period of four (4) years. The scheme will enhance the development of electronics ecosystem in the country. India will be well positioned as a global hub for Electronics System Design and Manufacturing (ESDM) on account of integration with global value chains, thereby becoming a destination for IT Hardware exports.
7.	Pharmaceuticals drugs	Department of Pharmaceuticals	3% to 10% for a period of 6 years	The plan aims to increase local production of pharmaceuticals, in-vitro diagnostics (IVD), and raw materials in India. The Indian pharmaceuticals market is supported by the following PLI schemes to boost domestic manufacturing capacity, including high-value products across the global supply chain. PLI scheme for Key Starting Materials (KSMs)/Drug Intermediates (DIs) and Active Pharmaceutical Ingredients (APIs) (PLI 1.0) PLI scheme for Pharmaceuticals drugs (PLI 2.0) The Department of Pharmaceuticals has announced the list of all 55 applicants selected to set up manufacturing facilities with a total quantum of 150 billion incentives. The PLI scheme envisages product diversification and incentives will be given for efforts of the participants which go for high value added products which are listed under the scheme. It also envisages to make the country self-reliant in many of the intermediate products. It is proposed to meet the objective of enhance manufacturing capabilities in the country by supporting firms with the potential of becoming global champions. However, given the nature of the sector, there will also be a provision for supporting some MSMEs within the Scheme. The expected outcomes (approx.) under the scheme (cumulative over a period of 6 years) are as follows- Incremental sales- 2,94,000 crore Exports- 1,96,000 crore Investments- 15,000 crore Employment- 1,00,000 jobs
8.	Food products	Ministry of Food Processing (MoFPI)	4% to 10% for a period of 6 years	The scheme is essentially meant for Indian companies and subsidiaries of MNCs operating in India with minimum sales of food products manufactured in India. The scheme will encourage investment in four food segments viz. Ready to Cook/ Ready to Eat (RTC/RTE) including millet based foods, Processed Fruits & Vegetables, Marine Products, Mozzarella Cheese. The objective of the scheme is to support creation of global food manufacturing champions; support Indian brands of value-added food products in the international markets; increase employment opportunities for off-farm jobs and ensuring remunerative prices of farm produce and higher income to farmers. Companies would be reached out through Indian Missions abroad. Industry Associations would be supporting to organize Webinar to attract potential investors to avail opportunities under PLIS. The ensuing benefits from the PLI scheme in this sector are expected to trickle down to farmers and help harness the massive employment generation potential in the sector. The PLISFPI scheme is made up of the following components: Incentivize the manufacture of four major food product segments: ready-to-cook/ready-to-eat foods, marine products, processed fruits and vegetables, and mozzarella cheese. Innovative and organic products from small and medium-sized enterprises (SMEs), such as eggs, egg products, and poultry meat, are covered under this component. Support the branding and marketing of select Indian food products abroad to enable their entry into international food markets and increase their visibility. For example, the scheme is considering providing grants for applicant entities to establish in-store branding, shelf space renting, and marketing. The Ministry of Food Processing closed PLI applications for the sector in June 2021. Applicants were examined on the following criteria: Category-I: Applicants are large entities who apply for Incentive based on Sales and Investment Criteria. Applicants under this category could undertake Branding & Marketing activities abroad also and apply for grant under the scheme with a common Application. Category-II: SMEs Applicants manufacturing innovative/ organic products who apply for PLI Incentive based on Sales. Category-III: Applicants applying solely for grant for undertaking Branding & Marketing activities abroad. As of December 2021, approvals have been granted to one category of applicants. As the incentive is based on sales, subject to minimum investment, higher value addition is inbuilt in the scheme. Further, product specific incentive is extended for value added Marine products viz. Canned, Battered & breaded, Pickles, Sausages etc. Role of contract Manufacturing has been recognized under the scheme and the scheme provides for Investment criteria to be met by the food majors and their contract manufacturers jointly. These products are extended 10% incentives for all the six years of scheme duration. Small and medium enterprises (SME), in the four segments will also be supported for manufacture innovative and organic products. This segment has been earmarked an outlay of 250 crore. The scheme envisages for holistic development of the sector. The outcomes/ benefits expected from the scheme are - Expansion of food processing capacity: 33,494 crore; Exports: 27,816 crore; Generation of employment: 2.5 lakh persons.

S. No.	Sectors	Implementing Ministry/ Department	Incentives	Description
9.	Solar photovoltaic (PV) modules	Ministry of New and Renewable Energy	Based on sales, performance criteria, and local value addition for a period of 5 years	Presently, solar capacity addition in the country depends largely upon imported solar PV cells and modules as the domestic manufacturing industry has limited operational capacities of solar PV cells and modules. Major achievement of this PLI Scheme for High Efficiency Solar PV Modules is the likely reduction of import dependence in a strategic sector like electricity. To make India an exporting country, the government plans to increase financing under the production-linked incentive (PLI) scheme. The increase is for domestic solar cell and module manufacture to 24,000 crore from the current 4,500 crore. R K Singh, the minister of power and new and renewable energy, stated that the country’s current solar module production capacity is 8,800MW, while solar cell manufacturing capacity is 2,500MW. The plan aims to build 10,000MW of manufacturing capacity for integrated solar modules, with a present direct investment of 17,200 crore. With the increase in allocation, the PLI scheme’s investments and production capacity would expand even further. Total incentives for eligible investors in the production of solar modules will cost the government 45 billion (approx. US$599.99 million) under the PLI scheme. In order to undertake global reach of this Scheme, MNRE will again interact with global industry leaders; write to various solar manufacturers’ associations, as well as requesting the various Indian embassies abroad to inform the potential investors in their respective countries. Manufacturers will be incentivized for higher efficiencies of solar PV modules and also for sourcing their material from the domestic market. Thus, the PLI Scheme will help not only in setting up of domestic manufacturing capacities in upstream stages of solar PV manufacturing, like poly-silicon and wafers which are presently absent in the country, but is likely to augment the entire solar PV manufacturing ecosystem, including boost to ancillary units and MSMEs. The outcomes/ benefits expected from the scheme are - Additional 10,000 MW capacity of integrated solar PV manufacturing plants.; Direct investment of around 17,200 crore in setting up solar PV manufacturing projects; Direct employment of about 30,000 and Indirect employment of about 1,20,000 persons; Import substitution of around 17,500 crore every year; Demand of 17,500 crore over 5 years for 'Balance of Materials' such as, Solar Glass, EVA, Backsheet, Junction Box, Ribbon etc. will lead to development of new types of industries where MSMEs will play a major role; Provide impetus to Research & Development to achieve higher efficiency in solar PV modules.
10.	Advanced chemistry cell (ACC) Battery	Department of Heavy Industries and NITI Aayog	Based on sales, performance criteria, and local value addition for a period of 5 years	The PLI Scheme for auto sector is open to existing automotive companies as well as new investors who are currently not in automobile or auto component manufacturing business. The scheme has two components viz Champion OEM Incentive Scheme and Component Champion Incentive Scheme. The Champion OEM Incentive scheme is a ‘sales value linked’ scheme, applicable on Battery Electric Vehicles and Hydrogen Fuel Cell Vehicles of all segments. The Component Champion Incentive scheme is a ‘sales value linked’ scheme, applicable on Advanced Automotive Technology components of vehicles, Completely Knocked Down (CKD)/ Semi Knocked Down (SKD) kits, Vehicle aggregates of 2-Wheelers, 3-Wheelers, passenger vehicles, commercial vehicles and tractors etc. This PLI Scheme for automotive sector along with the already launched PLI scheme for Advanced Chemistry Cell (ACC) ( 18,100 crore) and Faster Adaption of Manufacturing of Electric Vehicles (FAME) ( 10,000 crore) will enable India to leapfrog from traditional fossil fuel based automobile transportation system to environmentally cleaner, sustainable, advanced and more efficient Electric Vehicles (EV) based system. ACCs are the new generation of advanced storage technologies. They can store electric energy either as electrochemical or as chemical energy. In addition, they can convert it back to electric energy when required. Electric vehicles, solar rooftops, consumer electronics, etc., are the major battery-consuming sectors expected to grow in the coming years. All the demand for ACCs is currently fulfilled through imports as the manufacturing is negligible in India. PLI initiative will reduce import dependence and support the Atmanirbhar Bharat initiative. To promote electric vehicles in the country, the government has launched the FAME India Scheme. The focus is on manufacturing Advanced Chemistry Cell (ACC) in the country to bring down its cost. The scheme envisions the establishment of a competitive ACC battery manufacturing setup in the country. The scheme is implemented for five years with total budgetary support of 10,000 crores. The government also took some major steps to adopt electric vehicles in the country. On 12^th May 2021, the Government launched the PLI Scheme to bring down ACC battery prices. Approved on 15^th September 2021 with the total support of 25,938 crore, Electric Vehicles are covered under (PLI) scheme for Automobile and Auto Components. Reduction of GST on electric vehicles from 12% to 5%. Also, on chargers/ charging stations for electric vehicles, GST has been reduced from 18% to 5%. For the initial cost reduction of EVs, a notification is issued by SMoRTH to waive road tax on EVs. This will have a huge impact on cost reduction electric vehicles. Moreover, the government is also supporting the creation of charging infrastructure. An outlay of 181 billion (US$2.43 billion) has been earmarked by the government towards the scheme, which is intended to establish local manufacturing capacity of 50 Giga Watt Hour (GWh) of ACC and five GWh of Niche ACC capacity. This scheme is also in sync with India’s objective of accelerating EV adoption over the coming decade, while also reducing the dependence on imports. The scheme is mainly targeted at large players.
11.	Textile products	Ministry of Textiles	Based on sales, performance criteria, and local value addition for a period of 5 years	Approved with an outlay of 106.83 billion (US$1.44 billion). This scheme intends to shift the textile production from natural fibers to man-made fibers (MMF) and technical textiles, aligning with global consumption patterns. The product segments under this sector will include MMF apparel and MMF fabrics as well as 10 segments / products of technical textiles. Developing indigenous technical textiles manufacturing capacity is a key priority for the government as they have application in several sectors of the economy, including infrastructure, water, health and hygiene, defense, security, automobiles, aviation, etc. and- help secure sector efficiencies. Incentive structure of the PLI for Textiles Scheme The incentive structure has been so formulated that industry will be encouraged to invest in fresh capacities in these segments. There are two types of investment possible with different sets of incentive structure as stated below. Phase 1: Any person (includes firm / company) willing to invest minimum 3 billion (US$39.81 million) in plant, machinery, equipment, and civil works (excluding land and administrative building cost) to produce products of notified lines (MMF fabrics, garment) and products of technical textiles, shall be eligible to apply for participation in the scheme. They will be entitled to incentives under the PLI Scheme once they achieve a turnover of at least 6 billion (US$79.6 million). Structure of incentive: Participant companies achieving the minimum turnover requirements after a gestation period of two years and starting from FY 2024-25 are entitled to 15 % incentive on attaining the required turnover in Phase 1 of the scheme. Incentives in subsequent years is contingent on turnover increasing by at least 25 % each year up to FY 2028-29, with incentives falling by 1 % each year to reach 11 % in the final year of the scheme. Phase 2: Any person (includes firm / company) willing to invest minimum 1 billion (US$13.27 million) shall be eligible to apply for participation in this part of the scheme. Those generating a turnover of at least 2 billion (US$26.53 million) will receive incentives. In addition, priority will be given for investment in Aspirational Districts, Tier 3, Tier 4 towns, and rural areas. This scheme will positively impact states like Gujarat, Uttar Pradesh, Maharashtra, Tamil Nadu, Punjab, Andhra Pradesh, Telangana, Odisha etc. Structure of incentive: Producers with lower investment and turnover thresholds will be selected, and incentives will start at 11 % for achieving the required turnover and fall by 1% each year to reach seven in FY 2028-29, with incentives after year-one being subject to a similar condition of 25 % annual growth in turnover. It is estimated that over the period of five years, the PLI Scheme for Textiles will lead to: Fresh investment of more than 190 billion (US$2.52 billion). Cumulative turnover of over 3 trillion (US$39.8 billion). Additional employment opportunities of more than 750,000 jobs in this sector and 100,000s more for supporting activities. The textiles industry traditionally employs more women and is expected to increase their participation in the formal economy.
12.	Automotive industry and	Ministry of Heavy Industries and Public Enterprises.	Based on sales, performance criteria, and local value addition for a period of 5 years.	The use of ethanol in vehicles as a cost-effective and pollution-free alternative to other fuels. The flex fuel is made with a combination of gasoline, methanol, or ethanol. The idea proposed by the Minister of Road Transport & Highways is to encourage all vehicle manufacturers to power vehicles with flex engines. The Ministry has already issued guidelines under the PLI scheme to simplify the process. Emphasis is given to encourage the usage of new, innovative, alternative materials such as: BS6 compliant (E 85) Flex-Fuel Engine, Heated Fuel Rail for Flex-Fuel Engine, Heating Element for Flex-Fuel Engine etc. To reduce the consumption of cement and steel in road construction, the use of innovative materials and construction techniques is being promoted by the ministry. PLI Scheme would lead to cultivating 7 .5 lac jobs and accumulative production worth 2, 31,500 crore for the automobile and auto components sector. The incentive is applicable from 1^st April 2022 and will provide jobs over the next five years. Moreover, the OEM (Champion Original Equipment Manufacturers) Incentives scheme has approved the applicants. India’s federal government has approved the PLI scheme for automobile and auto components with a budgetary outlay of 259.38 billion (US$3.50 billion) to boost domestic manufacturing capacity, including the production of electric and hydrogen fuel cell vehicles. The scheme also gives incentive to products not being made in India but 50 % of the output has to be carried out in India in value addition. The scheme will increase MSME revenue over the next five years. Under the PLI Scheme, a total of 115 companies have applied.
	Drone Industry	Ministry of Civil Aviation.	Based on sales, performance criteria, and local value addition for a period of 3 years.	Under the PLI Scheme for drones and drone components, the government has liberalized the minimum value addition criteria to 40% of net sales for drones and drone components. The budget of the scheme is 1.2 billion (US$16.13 million). The PLI Scheme for the Drones and Drone components industry addresses the strategic, tactical and operational uses of this revolutionary technology. A product specific PLI scheme for drones with clear revenue targets and focus on domestic value addition is the key to building capacity and making these key drivers of India’s growth strategy. The PLI for Drones and Drone components industry, will over a period of three years, lead to investments worth 5,000 Crore, increase in eligible sales of 1500 crore and create additional employment of about 10,000 jobs.
13.	Speciality Steel	Ministry of Steel	4% to 12% for a period of 5 years	Speciality steel is value-added steel wherein normal finished steel is worked upon by way of coating, plating, heat treatment, etc to convert it into high value-added steel that can be used in various strategic applications like Defence, Space, Power, apart from the automobile sector, specialized capital goods etc. Approved with an outlay of 63.22 billion (US$849.85 million), the scheme will be implemented for a five-year period, from FY 2022-23, with the incentive to be released from FY 2023-24. The initial year may be delayed by up to two years in case of specific product categories. The release of the incentive will be from FY 2023-24 to 2027- 28 (FY 2025-26 to FY 2029-30 in case of deferment by two years). The five categories of specialty steel that have been selected in the PLI scheme are coated/plated steel products, high strength/wear resistant steel, specialty rails, alloy steel products and steel wires, and electrical steel. Guidelines were released in November 2021 and the ministry has opened the window for applications. The duration of the scheme will be from 2023-24 to 2027-28. It is expected to bring in an investment of approximately 40,000 crores. It will give employment to about 5,25,000 people of which 68,000 will be direct employment. By becoming Aatmanirbhar in producing speciality steel, India will move up the steel value chain and come at par with advanced steelmaking countries like Korea and Japan.

Expansion of the scheme

Initially, the focus of the scheme was on three sectors—Mobile Manufacturing and Specified Electronic Components, Critical Drug Intermediaries, Active Pharmaceutical Ingredients, and Manufacturing of Medical Devices.
In 2020, the Government decided to introduce the PLI Scheme for another 10 key sectors, namely, Electronic/Technology Products, Pharmaceutical drugs, Telecom & Networking Products, Food Products, White Goods (ACs & LED), High-Efficiency Solar PV Modules, Automobiles & Auto Components, Advance Chemistry Cell (ACC) Battery, Textile Products, and Speciality Steel.

List of permissible investments

Power Distribution System
Fire Detection & Alarm System (FDA)
Tele-communication & CCTV System
Illumination System
Material Handling System (Overhead crane, jib crane, fork lifter, hoist)
Fluid System (water, gas, fuel, steam, compressed air)
ACVS System
Fire fighting system
Interconnecting Piping
Effluent Treatment Plant (ETP), Zero Liquid Discharge (ZLD), Sewerage Treatment Plant (STP)
Shop drainage system
Laboratory
Roll shop & Workshop

Expenditure that is considered towards Investment in the Scheme

The expenditure incurred on land and building (including factory building / construction) required for the project / unit is not covered under the Scheme and, therefore, will not be considered for determining eligibility under the Scheme. There is no restriction on the percentage of used / refurbished plant, machinery and equipment to be considered towards Investment under the Scheme. The used / refurbished plant, machinery and equipment allowed under the Scheme shall have a minimum residual life of at least 5 years as per Hazardous and Other Wastes (Management and Trans-boundary Movement) Rules, 2016, amended vide Ministry of Environment, Forest and Climate Change Notification dated 11.06.2018. Further, a valuation certificate by a Chartered Engineer assessing the value and residual life shall also be required. In case of import, such valuation should be in accordance with Customs Valuation Rules and Circulars. The value of these plant, machinery and equipment shall be considered as lower of depreciated value (as per scale of depreciation fixed by Customs, whether these plant, machinery and equipment are imported or not) and the value assessed by Chartered Engineer (of India) or equivalent overseas chartered engineer. The Investment shall be considered only from the time the applicant company qualifies as a Domestic Company as per FDI Circular of 2017 or after 1^st April 2020 whichever is later.

(I). Expenditure incurred in plant, machinery, equipment and Associated Utilities

This shall include expenditure on plant, machinery, equipment and Associated Utilities as well as tools, dies, moulds, jigs and fixtures (including parts, accessories, components and spares thereof) of the same, used in the design, manufacturing, assembly, testing, packaging, or processing of any of the goods covered under the Target Segment. It shall also include packaging, freight/ transport, insurance, and erection and commissioning of the plant, machinery, equipment and Associated Utilities. Associated Utilities would include captive power and effluent treatment plants, essential equipment required in operation areas such as clean rooms, air curtains, temperature and air quality control systems, compressed air, water & power supply and control systems. Associated Utilities also includes IT and ITES infrastructure related to manufacturing including servers, software, and ERP solutions. All non-creditable taxes and duties will be included in such expenditure.

(II). Expenditure incurred on Research and Development (R & D)

Capital expenditure on R & D and product development related to the target segment including all stages in the entire value chain of the goods proposed to be manufactured and software integral to the functioning of the same. Such expenditure shall include expenditure on in-house and captive R & D, directly attributable to goods covered under the target segment, including all stages in the entire value chain of the goods proposed to be manufactured including software integral to the functioning of the same. Such expenditure shall include test and measuring instruments, prototypes used for testing, purchase of design tools, software cost (directly used for R & D) and license fee, expenditure on technology, IPR, Patents and copyrights for R & D. All non-creditable taxes and duties will be included in such expenditure.

(III). Expenditure related to transfer of technology (ToT) Agreements

This shall include cost of technology and initial technology purchase related to goods covered under the Target Segment. All non-creditable taxes and duties will be included in such expenditure. The applicant shall provide a statutory auditor certificate in respect of expenditure related to transfer of technology agreements.

(IV). Expenditure incurred on Land and Building

The expenditure incurred on Land and Building (including factory building/ construction) required for the project/ unit is not covered under the scheme and therefore will not be considered for determining eligibility under the scheme. In case of brownfield project, Investment towards augmentation of existing infrastructure, utilities, and auxiliary facilities, to cater to the needs of new facilities created through new investment for production of a particular product sub-category under target segments, shall be considered but limited to a maximum of 15 % of the committed investment.

Expenditure on consumables and raw material used for manufacturing shall not be considered as Investment.The date of payment made would be considered as the date of investment under the scheme. All Investments must be completed before commencement of production except the investment on account of payment scheduled after commissioning as per contract agreements such as payment on establishment of performance guarantee (PG) parameter, issue of PG certificate, and issue of final acceptance certificate (FAC).The head of investment, based on which eligibility is being determined, must be capitalized in the books of accounts of the applicants.

Incentive outlay of 13 key sectors under PLI scheme

S. No.	PLI Scheme Sector	Implementing Ministry/ Department	Incentive Outlay ( crore )
1.	Food Processing Industry	Ministry of Food Processing Industry	10,900
2.	National program on High Efficiency Solar PV module	Ministry of New & Renewable Energy	4,500
3.	Telecom & networking products	Dept. of Telecom	12,195
4.	Medical devices	Dept. of Pharmaceuticals	3,420
5.	Advanced Chemistry cell battery	Niti Ayog and Dept. Of Heavy Industries	18,100
6.	IT Hardware	Ministry of Electronics and Information Technology	5,000
7.	Large Scale Electronics Manufacturing	Ministry of Electronics and Information Technology	40,951
8.	White Goods (ACs & LED)	Ministry of Commerce	6,238
9.	Key Starting materials/ DIs/Active pharmaceutical ingredients	Dept. of Pharmaceuticals	6,940
10.	Specialty Steel	Ministry of Steel	6,322
11.	Automobiles & Auto Components	Department of Heavy Industries	57,042
12.	Textile Products: MMF segment and technical textiles	Ministry of Textiles	10,683
13.	Pharmaceuticals drugs	Department of Pharmaceutical	15,000
	TOTAL		1,97,291

How do production-linked incentive schemes work?

For instance if you are the government, and you want to spur production of a certain category of goods and the demand for such goods isn’t that great, but you think once they are manufactured in large quantities, or sold at the right price points, it should work out fine. This is where you will employ PLI or a production-linked incentive scheme. The PLI is an old and popular tool with governments to spur production of goods that the country sees as necessary for social good, taxes, or employment-generation reasons.
PLIs are essentially the incentives to companies to boost product. They could be in the form of tax rebates, import and export duty concessions, or maybe easier land-acquisition terms. Generally, the benefits of a PLI scheme are passed on to the final consumers of the goods in terms of lower prices. Take the example of electric vehicles. They don’t have ready demand but a shift to greener automobile is essential for the country. In this regard, the government has what is called the FAME scheme. It stands for Faster Adoption and Manufacturing of Hybrid and Electric Vehicles. Under this scheme are a whole lot of concessions for EV makers. Recently, the Indian government identified 13 priority sectors where PLI schemes will be launched with a total outlay of 2 trillion. Sectors for which incentives have already been approved are electronic or technology products, pharmaceuticals drugs, telecom & networking products, food Products, high-efficiency solar modules, automobile and auto components, specialty steel, textile manufacturing, advanced chemistry cell battery, textiles, and specialty steel.

Sector Wise Product Lines

Sector	Product Lines
Advance Chemistry Cell (ACC) Battery Manufacturing	ACC Batteries
Electronic/Technology Products	Semiconductor Fab Display Fab Laptop/ Notebooks Servers IoT Devices Specified Computer Hardware
Automobile and Auto Components	Automobile and Auto Components
Pharmaceuticals	Category 1 Biopharmaceuticals Complex generic drugs Patented drugs or drugs nearing patent expiry Cell based or gene therapy products Orphan drugs Special empty capsules Complex excipients
	Category 2 Active Pharma Ingredients (APIs) / Key Starting Materials (KSMs) and / Drug Intermediaries (Dls)
	Category 3 Repurposed Drugs Auto-immune drugs, Anti-cancer drugs, Anti diabetic drugs, Anti Infective drugs, Cardiovascular drugs, Psychotropic drugs and Anti-Retroviral drugs In-vitro Diagnostic Devices (IVDs) Phyto-pharmaceuticals Other drugs not manufactured in India Other drugs as approved
Telecom Products	Core Transmission Equipment 4G/5G, Next Generation Radio Access Network and Wireless Equipment Access & Customer Premises Equipment (CPE), Internet of Things (IoT) Access Devices and Other Wireless Equipment Enterprise equipment: Switches, Router
Textiles	Man-Made Fiber Segment Technical Textiles
Food Processing	Ready to Eat / Ready to Cook (RTE/ RTC) Marine Products Fruits & Vegetables Honey Desi Ghee Mozzarella Cheese Organic eggs and poultry meat
Solar PV manufacturing	Solar PVs
White Goods	Air conditioners LED
Steel Products	Coated Steel High Strength Steel Steel Rails Ally Steel Bars & Rods

PLI Scheme boosting manufacturing and export sector in India

The PLI is an innovative scheme and can help improve the cost competitiveness of local goods. By allowing investment in India, the scheme boosts export and manufacturing.PLI will help raise the country’s exports. With the addition of artificial fibers and technical textiles, the rise in amount is about US $110 to the US $120 billion.The government’s estimation shows an outcome of up to $504 billion and around 1 crore jobs will be added in 5 years. However, the Care ratings show a substantial part of more than 50-60% might be indirect. Moreover, MSMEs are expected to lead where the investment and overall turnover targets are not very high for some sectors.Perks of PLI schemes launched in the years 2020 and 2021 would be seen in the policy reform 2022.

Key Points of PLI Scheme

PLI Scheme is an outcome- and output-oriented scheme where incentives will be paid only if the manufacturers make the goods.
Sunrise sectors are promising sectors but they may need support in the initial stage.

This scheme will give cash incentives for five to seven years and all the sunrise and important sectors are proposed to be covered in this.
The sectors may be automobile, networking products, food processing, advanced chemistry and solar PV manufacturing.

Export base can be developed in sectors under PLI scheme.

There is a growing demand in the world for diversification in supply chains and India can become a major player.

The scheme shall only be applicable for target segments.
With the view to make India a manufacturing hub, the government launched the PLI scheme for mobile phones (electronic manufacturing) and it was extended to pharma products and medical equipment sectors. It now extends to 13 sectors till date.

Manufacturing in India needs reforms

Manufacturing has emerged as one of the high-growth sectors in India and has been consistently contributing to the GDP and employing almost 20% of India’s workforce. Merchandise exports from select industries (including engineering, petroleum products, gems and jewellery, pharmaceuticals and chemicals) stood at USD 106.06 billion between April 2021 and August 2021.In recent years, manufacturing has got a special push via ambitious campaigns like the ‘Make in India’ program to take India on the world map as a manufacturing hub and give worldwide credit to the Indian economy.
Despite an impressive recovery in certain subsectors in the latter half of 2021, supported by growth in production of natural gas, steel, cement, fertilizers, coal, refinery products and electricity, the manufacturing sector faced major challenges owing to the COVID-19 pandemic. The setbacks faced included-

Also, prices of raw materials, power, and freight shot up in sectors like steel manufacturing, which adversely affected small and medium enterprises. The cost of doing business and production remains a cause for concern. To combat the above issues faced by the Indian manufacturing sector, the Government of India (GoI) provided several incentives and measures such as extra stimulus introduced through the Make in India programs and product-linked incentive schemes for pharmaceuticals, textiles etc. Additionally, GoI established several subsector-specific schemes, such as launching technology innovation platforms, signed a collaboration deal with the Indo-Canada Chamber of Commerce to promote ‘Make in India’ and ‘Self-reliant India’ initiatives in the telecommunications sector, introduced Operation Green to support agricultural manufacturing and vide Foreign Direct Investment Policy in 2020, allowed investments of up to 74% in the defense manufacturing sector under its automatic route, to increase inflows.

Thus the Union Budget 2021-22 concentrated on enhancement of India’s domestic growth in manufacturing, trade and other sectors, development of a robust infrastructure, logistics and utility environment for the manufacturing sector. The latest trends in the field include greater reliance on technology and automation, with digitalization taking over the entire manufacturing ecosystem involving parts tracking, inventory management, logistics management, customer support – remote installation, monitoring, diagnostics and service being accepted and growing. The need of the hour is focusing on targeted sector-specific policy initiatives, centering on ease of entry and exit and provision of tax incentives, a well-thought-out five-year plan to supplement with a new legal regime that would help in the creation of a long-term vision for scalable sector growth. We need to offer a time-bound and easy legal framework for debt and capital restructuring, access to stock markets and ease in regulatory compliances. Reforms without caveats catalyze the growth of India’s manufacturing value chains by helping them lift their productivity, secure know-how and technology, and gain access to overseas capital. It is important to support them via large-scale value chains so that they become global champions and could focus on quality even in mass production.

Highlights of Production Linked Incentive Scheme (PLI)

PLI Scheme, started by the Government of India is not only to encourage foreign companies to find workforce in the country and thereby generate employment, but also encourage domestic and local production to create micro jobs. Hence, PLI scheme is an initiative that provides incentives to domestic industries to boost local production. When that happens, specifically tailored products emerge that satisfy a selected niche of target audience. Domestic businesses also help in cutting down import bills. As per the PLI scheme, the government encouraged domestic companies and establishments to set up or expand on manufacturing units to increase production, to which the government provides incentives on incremental sales. According to the PLI scheme update in November 2020, the scheme aimed to include ten more labor intensive sectors of production—examples include food processing, textiles etc. in addition to the already existing sectors like allied equipment for mobile phones and assembly, pharma and medical devices. The PLI scheme is essential in the country for many reasons.

The prime necessity, as the Director of ICRIER said, is to neutralize the amount of imports and exports in the country in a non-discriminatory manner. This is possible when domestic industries are given more and due importance.
Another reason is that India is primarily a labor intensive workforce owing to the population, and that the government could focus on capital influx for growth. But the capital intensive growth can generate returns only after a long time, duration that foreign funding can afford. So instead, the government shifting its focus to boost short term, under a year result driven industries, can potentially balance the trade into and out of the country.

The PLI scheme can also bring back old designs and product customs that can contribute heavily to the diversity, while also empowering forgotten artistry buried due to colonialism.

The framework of the PLI scheme is to reward increased production.

Due to the niche and specificity of PLI linked sectors, that mostly involve careful and attentive focus on manpower and creating, PLI can enhance building systems to adjust to climate change and even essentially reverse it in the many years to come.

Salient Features of the Scheme:

To make India a manufacturing hub, the government recently announced the PLI scheme for mobile phones, pharma products, and medical equipment sectors.

The scheme was notified on 01.04.2020 as a part of the National Policy on Electronics.
It proposes a financial incentive to boost domestic manufacturing and attract large investments in the electronics value chain.
PLI guidelines were released on 01.06.2020.
Quantum of Incentive: The scheme shall extend an incentive of 4% to 6% on incremental sales (over base year) of goods manufactured in India and covered under target segments, to eligible companies, for a period of five (5) years with financial year (FY) 2019-20 considered as the base year for calculation of incentives (incentives applicable from 01.08.2020).
The Scheme will be implemented through a Nodal Agency which shall act as a Project Management Agency (PMA) and be responsible for providing secretarial, managerial and implementation support and carrying out other responsibilities as assigned by MeitY from time to time.

Target Segments:

Total expenditure outlay of the scheme:

40,995 crore (USD 5.7 Billion) in five years.
The tenure of the PLI Scheme has been extended from the existing five years (FY 2020-21 to FY 2024-25) to six years (FY 2020-21 to FY 2025-26).

Eligibility:

According to the scheme, companies that make mobile phones which sell for 15,000 or more will get an incentive of up to 6 per cent on incremental sales of all such mobile phones made in India.
In the same category, companies which are owned by Indian nationals and make such mobile phones, the incentive has been kept at 200 crore for the next four years.
All electronic manufacturing companies which are either Indian or have a registered unit in India will be eligible to apply for the scheme.
These companies can either create a new unit or seek incentives for their existing units from one or more locations in India.

What kind of investments will be considered?

All investment done by companies on land and buildings for the project will not be considered for any incentives or determine eligibility of the scheme.

Expansion of Production Linked Incentive scheme

Based on the ten sectors to which the Production Linked Incentive scheme was expanded to, the government aims at achieving the following targets:

The government aims to make India an integral part of the global supply chain and enhance exports
India is expected to have a USD 1 trillion digital economy by 2025 as it expects the demand for electronics to increase under its projects like Smart City and Digital India
The PLI scheme will make the Indian automotive Industry more competitive and will enhance the globalization of the Indian automotive sector
The Indian Textile Industry is one of the largest in the world and with this scheme, it shall attract large investment in the sector to further boost domestic manufacturing, especially in the manmade fibre (MMF) segment and technical textiles
India, being the second-largest producer of steel in the world, introducing it under the PLI scheme will benefit the country as it may expand export opportunities
Similarly, telecom, solar panels, pharmaceuticals, white goods, and all the other sectors introduced can contribute to the economic growth of the country and make India a manufacturing hub globally

Sectors	Implementing Ministry/Department	Approved financial outlay over a five-year period ( in crores)
Advance Chemistry Cell (ACC) Battery	NITI Aayog and Department of Heavy Industries	18100
Electronic/Technology Products	Ministry of Electronics and Information Technology	5000
Automobiles & Auto Components	Department of Heavy Industries	57042
Pharmaceuticals drugs	Department of Pharmaceuticals	15000
Telecom & Networking Products	Department of Telecom	12195
Textile Products: MMF segment and technical textiles	Ministry of Textiles	10683
Food Products	Ministry of Food Processing Industries	10900
High-Efficiency Solar PV Modules	Ministry of New and Renewable Energy	4500
White Goods (ACs & LED)	Department for Promotion of Industry and Internal Trade	6238
Speciality Steel	Ministry of Steel	6322
Total		145980

Objectives of PLI scheme

It aims to make India compliant with World Trade Organization obligations.
To make non-discriminatory and neutral following domestic sales and exports.

These objectives target foreign investments in cutting-edge technology and core skill sectors, increase exports, and boost the economic scale. It also aims to make India a part of the international supply chain.

The PLI scheme is designed with four objectives:

The reason it has caught on is that the application process is not complicated, and the incentive offered is very simple and tied to conditions that are specific and easy to calculate. The incentive is 4-6% of incremental sales with a defined base year.

Targets and strategy for implementation

There will be an all-India rollout of the scheme.

Implementation of the plan shall be carried out by a Project Management Agency (PMA).

The PMA is responsible for evaluating applications and proposals, verifying eligibility for support, scrutinizing claims that are eligible for incentive payments, and so on

An incentive will be paid under this scheme over six years, ending in 2026-27. An incentive due for payment for a particular year will be due in the subsequent year. During the contract period of 2021-22 to 2026-27, the scheme will last for six years.

The fund limit of the scheme, i.e. the cost shall not exceed the approved amount, is imposed. An incentive award maximum shall be determined in advance for each beneficiary at the time of their approval. There shall be no exceeding of this maximum regardless of achievement/ performance.

This program is expected to promote the expansion of processing capacity by 2026-27, which will enable processed foods worth 33,494 crore as well as providing jobs for almost 2.5 lakh people.

Methodology and Mechanisms of Administration and Implementation

The Empowered Group of Secretaries (EGoS) at the Centre would be chaired by the Cabinet Secretary, which would monitor the Scheme

An Inter-Ministerial Approval Committee (IMAC) would determine and approve which applicants were eligible for this scheme, and sanction and release incentives of funds would be decided.

To move forward with the scheme, the Ministry will develop an Annual Action Plan that covers various activities.

Implementation of the plan shall be carried out by a Project Management Agency (PMA). It would have a third-party evaluation process and midterm evaluation mechanism embedded in it.

Implementing Bodies

Proposed Outcomes of the schemes

The companies approved under the scheme are expected to generate the following:

Production:

Over 10.5 lakh crore (USD 141 billion) in next five years
Mobile Phone (Invoice Value 15,000 and above): Proposed production of over 9 lakh crore (USD 122 billion)
Mobile Phone (Domestic Companies) Proposed production of over 1.23 lakh crore (USD 16 billion)
Specified Electronic Components Proposed production of over 15,700 crore (USD 2.1 billion)

Export:

Out of total production, around 60% ( 6.5 lakh crore / USD 84 billion) will be contributed by exports in the next five years

Investment:

Around 11,000 crore (USD 1.43 billion)

Employment:

Over 2 lakh (0.2 million) direct employment is likely to be generated in the next five years along with an additional indirect employment of nearly three times

Domestic Value Addition:

Expected to grow from the current 15-20% to 35-40% in case of Mobile Phones and from 25-35% to 45-50% for electronic components.

Impact on Electronic Manufacturing

This Scheme will provide an impetus for moving significant manufacturing capacities to India thereby creating large economies of scale which will further drive the supply chain ecosystem into the country.

The Scheme will lead to new investments and increased tax revenues in the electronics manufacturing sector.

The Scheme is expected to contribute significantly to achieving a USD 1 trillion digital economy and a USD 5 trillion GDP by 2025.

The scheme along with other government incentives and initiatives are expected to offset India’s overall disadvantage when compared to other global markets by 6.4% -10.9%.

The PLI Scheme will help in making India a globally competitive destination for electronics manufacturing and create domestic champions to further our mission of achieving an 'Atmanirbhar Bharat'.

The scheme has resulted in investment of 2,336 crore, production of 54,357 crore (export 16,800 crore) and additional employment of 12, 350, as per the March 2021 QRR.

The main aim of this scheme was to invite foreign investors to set up their manufacturing units in India and also promote the local manufacturers to set up or expand their existing units and generate employment thereby cutting down the country’s reliance on imports from other countries.

The Prime Minister's clarion call for "Atmanirbhar Bharat" has brought Manufacturing' to the centre stage and emphasized its significance in driving India's growth and creating employment. A strong, vigorous, and dynamic manufacturing sector must be the driver of India's economic growth. The Production Linked Incentive scheme for Large Scale Electronics Manufacturing has paved the way for domestic manufacturing, providing India with the much-needed impetus to augment its manufacturing capacity and export potential, further promoting the 'Make in India’ Initiative of Government. Emboldened by the industry response from the PLI scheme, Ministry of Electronics and Information Technology (MeitY) is taking additional steps to bring new technologies such as- semiconductor fab and display fabrication into the country which, at present, are only available in a few select developed nations.

Thus the Production Linked Incentive or PLI scheme is a scheme that aims to give companies incentives on incremental sales from products manufactured in domestic units. It was launched in April 2020, for the Large Scale Electronics Manufacturing sector, but later towards the end of 2020 was introduced for 10 other sectors. This scheme was introduced in line with India’s Atmanirbhar Bharat campaign.To further replicate the success of the PLI Scheme for electronics manufacturing, the Union Cabinet chaired by the Prime Minister Narendra Modi, on 11 November 2020, has given its approval to introduce the Production-Linked Incentive (PLI) Scheme in thec1 10 key sectors.The first sector which the PLI scheme had targeted was the Large Scale Electronics Manufacturing in April 2020, and by the end of the year (November 2020), 10 more sectors including food processing, telecom, electronics, textiles, specialty steel, automobiles and auto components, solar photovoltaic modules and white goods such as air conditioners and LEDs were also expanded under the PLI schemeAs far as the eligibility is concerned, all electronic manufacturing companies which are either Indian or have a registered unit in India will be eligible to apply for the schemeIn the Union Budget 2021, Finance Minister Nirmala Sitharaman mentioned the inclusion of thirteen more sectors under the PLI Scheme for a period of five years and 1.97 lakh crores have been allocated for this scheme from Financial Year 2022.

Various PLI schemes

S.NO.	PLI Schemes	Description
A.	Concluded schemes	The initial round of PLI schemes spanning mobile phones, drugs and medical devices attracted investments of over US$ 5 billion. It is pertinent to note that their progress is being monitored closely. Recognizing the need for additional capacities for some drugs and medical devices, the relevant PLI schemes have been reopened for applications till 31^st August 2021. Further, the scheme aimed at the IT hardware sector also drew in investments worth US$ 35 million, which are likely to reduce dependence on imports in the electronics sector. The scheme for pharmaceutical drugs and in-vitro medical diagnostic devices (concluded on 31^st August 2021) covered a broad range of products, when compared with its first edition. However, the bases for evaluation of the applications were revamped and several scheme parameters also evolved since its launch. Given the nuances involved, authorities have proactively responded to industry concerns. Despite the rapid changes to the scheme, the industry continues to remain hopeful.
B.	Ongoing schemes
a.	White goods	Originally intended for the manufacture of finished goods such as air conditioners (ACs) and LED lights, this scheme was restructured and announced for component manufacturers of ACs and LED lights. The investment and incremental sales thresholds outlined here have posed a challenge to several manufacturers as they are considered higher than the industry norms. This scheme was open for applications until 15th September 2021.
b.	Solar PV modules	Currently, the nation largely relies on imports of solar PV modules and cells. Designed to combat this issue, the scheme has drawn considerable attention from potential investors. The success of this scheme would reduce import dependence in a strategy sector like electricity, thereby, increasing its significance. The scheme also promotes local procurement, thus triggering a cascading impact of the incentives. This will boost creation of ancillary units and augment the entire solar PV manufacturing ecosystem. The investment arising from the scheme (approximately US$ 2 billion) is expected to create an additional 10,000 MW capacity of integrated solar PV manufacturing plants. The last date for applications under this scheme was 15^th September 2021.
c.	Specialty steel	The import of specialty steel entails a large outflow of foreign exchange at present. The scheme aims to tackle this issue at its root by promoting end to end manufacture. This move will potentially bring India at par with global steel giants such as Korea and Japan. With incentives ranging from 4% to 12%, the scheme will benefit integrated steel plants as well as smaller players in the sector. The detailed guidelines for this scheme are awaited.
C.	Upcoming PLI schemes
a.	Advanced chemistry cells (ACC) Battery	Renewable energy continues to be a niche space, despite its undeniable significance. Presently, there is nominal investment in this space in India, despite the varied applications. Under the scheme, investments will be approved through a bidding mechanism for creation of cumulative 50 GWh of ACC (with additional 5 GWh for niche ACC) manufacturing facilities in India. This will support the battery requirements towards electronics, EVs, renewable energy power grids and the like.
D.	Schemes announced recently
a.	Textile	India has been aiming to increase its share in global textile exports. However, this has not been possible yet due to structural disabilities. This scheme aims to incentivize the manufacture of apparel made from man-made fibre and technical textiles. Interestingly, the scheme aims to promote the manufacture of apparel and not the input textiles, which are largely imported. The scheme has recently undergone some structural changes following industry feedback on investment thresholds and other parameters. It is now expected to be announced in the next few weeks.
b.	Automobiles and drones	Industry has long anticipated the launch of this scheme, which was recently approved. The scheme is aimed at promoting manufacture of electric vehicles and advanced automotive technology components of vehicles. This scheme aims at the introduction of state of the art technology in the sector. It also covers drones and drone components, aiming to address the strategic, tactical and operational use of this technology.
E.	Schemes at evaluation stage
a.	Food processing	This scheme was met with an encouraging response from investors of all sizes. A key differentiator here was the inclusion of contract manufacturers, who play a key role in the sector. Currently, approximately 275 expressions of interest received under this scheme are being evaluated and the results are awaited. Overall, the scheme is expected to lead to expansion of food processing capacity by over US$ 4 billion and exports of approximately US$ 3.5 billion.
b.	Telecom	This scheme intends to take the nation closer to becoming a manufacturing hub of telecom and networking equipment. This development will automatically offset the heavy reliance on imports in this niche space. While the 36 applications received are currently being evaluated, major global players have expressed an interest to expand in India based on these incentives. The approved investors are expected to bring in an investment of US$ 40 million.

Production linked incentives seem to be the way forward for federal government grants in India. In the near future, similar incentives are likely to be extended to several other products such as electronic segment for semiconductor FAB(s), display FAB(s), wearables, hearables, IoT devices and drones. These incentives also go hand in hand with other initiatives for the manufacturing industry such as state incentives, ‘Manufacturing and Other Operations in Warehouse Regulations (MOOWR), and the 17% corporate tax rate. Viewed together, these offer composite financial support to manufacturers and should be assessed cohesively.

Disbursements under PLI

An applicant may submit a claim for disbursement of incentive as early as the end of the quarter in which the eligibility criteria for the year in consideration have been met. Claims for disbursement of incentive may be submitted only on a quarterly or half-yearly or annual basis. Claims for any period shall be made only once, unless withdrawn, and no subsequent part claims shall be allowed for the said period.

The period for determination of baseline shall be as follows:
Baseline for Investment: As on 31.03.2020 Baseline for Sales of Manufactured Goods:

a) First-year i.e. FY 2020-21: Period from 01.08.2019 to 31.03.2020
b) Second-year onwards: Period from 01.04.2019 to 31.03.2020

Audit

Ministry in charge shall be empowered to conduct a financial, functional, and technical audit of the selected company / companies who have signed MoU for claiming incentive under the scheme.
The statutory audit shall be conducted by CAG.

Disbursement of Incentive

For claiming incentives under the PLI Scheme, Selected companies will be required to submit claims for disbursement of incentive to the PMA.
Claims for disbursement of incentive shall be filed within 7 months from the end of the financial year to which the claim pertains. For example, Claim for say, FY23-24 has to be submitted within 31^st October, 2024.
The PMA shall verify eligibility and assess incentive payable to an applicant and recommend the same to the competent authority.
The Competent Authority will examine the claims for approval of incentive disbursement.
After approval for disbursement of incentive by competent authority, the same will be disbursed by Ministry under intimation to PMA.
If the PMA or Ministry, at any stage, finds or comes to know and become satisfied that eligibility under the Scheme and /or disbursement of incentives have been obtained by manipulation or misrepresentation or by furnishing of false information, Ministry may ask the applicant to refund the incentives along with interest calculated at twice the rate of 3 years SBI MCLR prevailing on the date of disbursement, compounded annually, after giving an opportunity to the applicant of being heard by the competent authority.

The distribution of incentive under different situation shall be as per the following:

Annual ceiling on incentive payable to each applicant

Annual Ceiling on incentive payable to each applicant will be determined based on Financial Outlay as indicated in Para 8.1 of the Scheme and number of eligible applicants in each of the target segments. The annual financial outlay will be appropriated proportionately depending on number of applicants under each target segment. At the end of the year, any un-appropriated incentive amount resulting from underperformance with respect to the prescribed annual ceiling on Net Incremental Sales, by any applicant(s) in any target segment, will be allocated to the remaining eligible applicants under such target segment who have achieved Net Incremental Sales in excess of the annual ceiling. Such incentive amount will be distributed only to the extent of excess performance by an applicant beyond the annual ceiling of net incremental sales of eligible product. If the incentive amount payable on cumulative excess performance by the applicants in a target segment is greater than the un-appropriated incentive amount, then the sum of incentives payable beyond the ceiling amount for each applicant will be restricted to the un-appropriated incentive amount for such target segment and such amount will be distributed among the over-performing applicants in proportion to their respective excess performance beyond the annual ceiling of Net Incremental Sales.

For example, if there are five (5) eligible applicants under Mobile Phones (Invoice Value of 15,000 and above) target segment, the year-wise incentive ceiling per applicant will be 1/5th of the annual financial outlay for the said target segment. In case of underperformance by say 2 applicants, the un-appropriated amount relating to these applicants will be allocated to the 3 remaining applicants in proportion to their performance in excess of the annual ceiling of Net Incremental Sales. Excess incentive payable to each of these 3 applicants will be capped to the lower of the following:

Incentive payable on excess performance beyond annual ceiling of net incremental sales at the eligible rate of incentive for such year.
or
Share of un-appropriated incentive amount, divided in proportion to the excess performance by the applicants over the annual ceiling of Net Incremental Sales for such applicants.

Schemes for Electronics Manufacturing

In order to position India as a global hub for Electronics System Design and Manufacturing (ESDM) and push further the vision of the National Policy on Electronics (NPE) 2019, three schemes namely the Production Linked Incentive Scheme (PLI), Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS) and Modified Electronics Manufacturing Clusters Scheme (EMC 2.0) were notified in April 2020. A fourth scheme, namely the Production Linked Incentive Scheme (PLI) for IT Hardware was notified in March 2021.

Electronics manufacturing in India has grown rapidly with a CAGR of around 23% during the last 5 years, with domestic production of electronics hardware touching $76 bn in 2019-20. The electronics manufacturing industry currently provides employment for over 2 million people in India. To further facilitate large-scale manufacturing, development of a supply chain ecosystem, and building of new manufacturing clusters in the country, each electronic manufacturing scheme has been carefully constructed to incentivize the electronics manufacturing industry.

The items listed under the Target Segment, ‘Specified Electronic Components’ are agnostic to end-use or application and any company proposing to manufacture the items listed under the Specified Electronic Components is eligible to apply under PLI Scheme subject to other eligibility and qualification criteria mentioned in the scheme notification and PLI guidelines.

Mandatory documents that need to be submitted along with the information submitted in the application form

The Applicant needs to upload the following mandatory documents along with the information submitted in the application form.

Company Structure:

Certified copy of the memorandum and articles of association or equivalent registration document
Certificate of incorporation of Company (Issued by ROC)
Letter of Authorization by Board of Directors or Managing Director or Equivalent.
Shareholding Pattern (Latest submitted with ROC and certified by Company Secretary)

Company Details:

Self-certified copies of PAN, GST Certificate for the applicant,
Self-certified copies of brief profile of Chairman, CEO and CXOs

Credit History:

Certificate from Company Secretary / Board of Directors - provide details of presence in RBI’s Defaulter and Willful Defaulter Lists, SEBI Debarred List and CIBIL Score.

Qualification Criteria:

In case the applicant’s annual report is being prepared on calendar year basis or does not reflect the consolidated global manufacturing revenue in the Target Segment, the applicant should provide a certificate for consolidated global manufacturing revenue in the Target Segment from April 01, 2019 to March 31, 2020. The annual report may be submitted for CY 2019 or FY 2019-20, as may be available.
The certificate issued by the applicant should mention names of group companies, relationship with the applicant, location of registration and manufacturing revenue of the company in the target segment considered in consolidated revenue.
The applicant is required to submit a certificate from such group company whose revenue is being considered for, stating name of the company, relationship with the applicant, registration no., location of registration and revenue from manufacturing in the target segment. Certificate from authorized representative of such group company will suffice for this purpose and there is no explicit need for a board resolution or separate certificates from all the constituent companies of such group company.

Financial Details:

Self-certified certified copies of Annual Reports including Annual Financial Reports along with schedules for 3 years. Most recent reports to be provided.

Baseline Details:

Certificate, attested by an authorized signatory, mentioning Sales of Manufactured Goods covered under Target Segment and Eligible Product for Financial Year 2019-20 and also for the period from 01.08.2019 to 31.03.2020
Certificate, attested by an authorized signatory, mentioning value of fixed assets (including Tangible and Intangible) as on 31.03.2020
Audited Financial Statement for Financial Year 2019-20 and statutory auditor certificate confirming the above mentioned Sales of Manufactured Goods covered under Target Segment and Eligible Product should be furnished by 31.10.2020.

Regulatory Treatment:

Provide information on Licenses, permits and third-party approvals necessary to execute the project
Proposed process and timelines for obtaining clearances

Application Fee:

Proof of Application Fee payment.

Note: Any other document may be sought by PMA / MeitY for clarifications.

The company needs to fulfill the qualification and eligibility criteria for the target segment which is Specified Electronic Components and not for individual items. Therefore if a company is manufacturing both capacitors and PCBs, the incremental investment and incremental sales of manufactured goods considered for the purpose of determining eligibility and applicable incentive will be a sum for the two items i.e. the criteria has to be met after combining all items covered within the target segment and not individually.

For the purpose of appraisal and approval under the PLI Scheme, the Competent Authority shall be defined as per delegation of powers for appraisal and approval of Public Funded Schemes and Projects vide OM No. 24(35)/PF-II/2012 dated 05.08.2016 issued by Department of Expenditure, Ministry of Finance or any subsequent modifications thereof. For the purpose of disbursal under the PLI scheme, Competent Authority will be as per procedure applicable in the Ministry for disbursement under other schemes.

Which companies and what kind of investments will be considered in PLI Scheme?

All electronic manufacturing companies which are either Indian or have a registered unit in India will be eligible to apply for the scheme.
These companies can either create a new unit or seek incentives for their existing units from one or more locations in India.
Any additional expenditure incurred by companies on plant, machinery, equipment, research and development and transfer of technology for manufacture of mobile phones and related electronic items will be eligible for the incentive scheme.
However, all investment done by companies on land and buildings for the project will not be considered for any incentives or determine eligibility of the scheme.

Due to Covid situations, the tenure of 5 years of PLI Schemes launched in 2020-2021 has been extended by one year till 2025-2026. Participating companies will get the option of choosing a period of any 5 years till 2025-2026 for meeting their production targets under the scheme. Investments made in 2020-2021 will continue to be counted as eligible investments.

Production Linked Incentive Scheme (PLI) for Large Scale Electronics Manufacturing – An

The domestic electronics hardware manufacturing sector faces lack of a level playing field vis-à-vis competing nations. The sector suffers disability of around 8.5% to 11% on account of –

lack of adequate infrastructure

domestic supply chain and logistics

high cost of finance

inadequate availability of quality power

limited design capabilities and focus on R & D by the industry

inadequacies in skill development

The vision of National Policy on Electronics 2019 (NPE 2019) is to position India as a global hub for Electronics System Design and Manufacturing (ESDM) by encouraging and driving capabilities in the country for developing core components and creating an enabling environment for the industry to compete globally.

Production Linked Incentive Scheme (PLI) for Large Scale Electronics Manufacturing notified vide Gazette Notification No.CG-DL-E-01042020-218990 dated April 01, 2020 offers a production linked incentive to boost domestic manufacturing and attract large investments in mobile phone manufacturing and specified electronic components, including Assembly, Testing, Marking and Packaging (ATMP) units. The Scheme would tremendously boost the electronics manufacturing landscape and establish India at the global level in electronics sector.

The scheme shall extend an incentive of 4% to 6% on incremental sales (over base year) of goods manufactured in India and covered under target segments, to eligible companies, for a period of five (5) years subsequent to the base year as defined.
The Scheme is open for applications for a period of 4 months initially which may be extended. Support under the Scheme shall be provided for a period of five (5) years subsequent to the base year
The Scheme will be implemented through a Nodal Agency which shall act as a Project Management Agency (PMA) and be responsible for providing secretarial, managerial and implementation support and carrying out other responsibilities as assigned by MeitY from time to time.

After the success of the First Round of Production Linked Incentive Scheme in attracting investments in mobile phone and electronic component manufacturing, the proposal for accepting applications under Second Round of the PLI Scheme has been approved by the Competent Authority. The target segment for the purpose of this round shall be Specified Electronic Components.Under the Second Round, incentives of 5% to 3% shall be extended on incremental sales (over base year i.e. 2019-20) of goods manufactured in India and covered under the target segment, to eligible companies, for a period of four (4) years.The Application Window shall be open until 31.03.2021 initially and may be extended and / or reopened based on response from the industry. Incentives under the Second Round of PLI Scheme shall be applicable from 01.04.2021.

Production Linked Incentive Scheme (PLI) for Large Scale Electronics Manufacturing

The Production Linked Incentive Scheme (PLI) for Large Scale Electronics Manufacturing proposes a financial incentive to boost domestic manufacturing and attract large investments in the electronics value chain including mobile phones, electronic components and ATMP units. Production Linked Incentives of up to 40,951 crores will be awarded over a period of 5 years.
Highlights

Target Segments Eligible under PLI Scheme

Specified Electronic Components
SMT components
Discrete semiconductor devices including transistors, diodes, thyristors, etc.
Passive components including resistors, capacitors, etc. for electronic applications
Printed Circuit Boards (PCB), PCB laminates, prepregs, photopolymer films, PCB printing inks
Sensors, transducers, actuators, crystals for electronic applications
System in Package (SIP)
Micro / Nano-electronic components such as Micro Electromechanical Systems (MEMS) and Nano Electromechanical Systems (NEMS)
Assembly, Testing, Marking and Packaging (ATMP) units

Incentive

Incentive of 3% to 5% on incremental sales (over base year) of goods manufactured in India

Incentive Rate

Year 1: 5%
Year 2: 4%
Year 3: 4%
Year 4: 3%

Incremental Investment Over Base Year

25 Crore over 4 Years Cumulative Minimum (Crore):
Year 1: 5 Crore
Year 2: 11 Crore
Year 3: 18 Crore
Year 4: 25 Crore

Incremental Sales Of Manufactured Goods Over Base Year

Year 1: 15 Crores
Year 2: 35 Crores
Year 3: 60 Crores
Year 4: 100 Crores

Eligibility

Eligibility shall be subject to thresholds of incremental investment and incremental sales of manufactured goods

Tenure of the Scheme

4 years applicable from 01.04.2021

Process Flow

First Round of Production Linked Incentive Scheme (PLI) for Large Scale Electronics

First Round of Production Linked Incentive Scheme (PLI) for Large Scale Electronics includes financial incentive to boost domestic manufacturing and attract large investments in the electronics value chain including electronic components and semi-conductor packaging.

The first phase of the PLI scheme was dedicated to the Large Scale Electronics Manufacturing sector and the scheme proposed to increase the manufacturing of mobile phones in India along with setting up their Assembly, Testing, Marking and Packaging (ATMP) units

The total cost proposed for the scheme was 40,995 crore
It was set up to benefit a few global investors and mainly the domestic manufacturers in India
With high potential for employment generation, the scheme can help employee over 2 lakh people in 5 years in the electronics manufacturing sector
Till date, in the case of electronics, the assembling of objects was done in India, while the production was done outside. With the PLI scheme and Make in India campaign, the electronics can be made ad assembled in the domestic industries itself
The production of mobile phones in the country has gone up significantly from around 18,900 crore in 2014-15 to 1,70,000 crore in 2018-19 and the domestic demand is almost completely being met out of domestic production. With PLI, this can be increased even further.

The table given below shows the financial outlay as per the first phase of the Production Linked Incentive (PLI) Scheme:

Sectors	Implementing Ministry/ Department	Financial outlays( in crore)
Mobile Manufacturing and Specified Electronic Components	MEITY	40951
Critical Key Starting materials/ Drug Intermediaries and Active Pharmaceutical Ingredients	Department of Pharmaceuticals	6940
Manufacturing of Medical Devices.	Department of Pharmaceuticals	3420

Production Linked Incentive Scheme for Pharmaceuticals

PLI scheme for Pharmaceuticals was introduced for a period of five years between FY 2020-21 to 2028-29. Total incremental sales of 2,94,000 crore and total incremental exports of 1,96,000 crore are estimated during six years from 2022-23 to 2027-28.
The scheme is expected to generate employment for both skilled and unskilled personnel, estimated at 20,000 direct and 80,000 indirect jobs as a result of growth in the sector.
The duration of the scheme will be from FY 2020-21 to FY 2028-29. This will include the period for processing of applications (FY 2020-21), an optional gestation period of one year (FY 2021-22), an incentive for 6 years and FY 2028-29 for disbursal of incentive for sales of FY 2027-28.

Second Round of Production Linked Incentive Scheme (PLI) for Large Scale Electronics Manufacturing

Second Round of Production Linked Incentive Scheme (PLI) for Large Scale Electronics Manufacturing was made for financial incentive to boost domestic manufacturing and attract large investments in the electronics value chain including electronic components and semiconductor packaging.

S.No. 1	Description of Goods Specified Electronic Components
1.1	SMT components
1.2	Discrete semiconductor devices including transistors, diodes, thyristors, etc.
1.3	Passive components including resistors, capacitors, etc. for electronic applications
1.4	Printed Circuit Boards (PCB), PCB laminates, prepregs, photopolymer films, PCB printing inks
1.5	Sensors, transducers, actuators, crystals for electronic applications
1.6	System in Package (SIP)
1.7	Micro / Nano-electronic components such as Micro Electromechanical Systems (MEMS) and Nano Electromechanical Systems (NEMS)
1.8	Assembly, Testing, Marking and Packaging (ATMP) units

Production Linked Incentive Scheme (PLI) for IT Hardware

The Production Linked Incentive Scheme for IT Hardware proposes a financial incentive to boost domestic manufacturing and attract large investments in the value chain. The scheme seeks to incentivize companies to utilize the existing installed capacity to fulfill the increasing domestic demand. Product Linked Incentives of upto 7,300 crore will be awarded over a period of 4 years.
Highlights

Target Segments Eligible under PLI Scheme

Laptops, Tablets, All-in-One PCs, and Servers.
IT Hardware Companies- For eligibility all Incremental Sales of Manufactured Goods (covered under target segments) irrespective of Invoice Value shall be considered.

Laptops (Invoice value of 30,000 and above)
Tablets (Invoice value of 15,000 and above)
All-in-One PCs
Servers

Domestic Companies- Domestic Companies shall be defined as those which are owned by resident Indian citizens as defined in the FDI Policy Circular of 2017. A company is considered as ‘Owned’ by resident Indian citizens if more than 50% of the capital in it is beneficially owned by resident Indian citizens and/or Indian companies, which are ultimately owned and controlled by resident Indian citizens.

Laptops
Tablets
All-in-One PCs
Servers