Production Linked Incentive Scheme

Syllabus: GS3/ Economy & Development

In News

• The Government has decided not to extend the PLI Scheme beyond the existing 14 sectors.
  • Despite initial success in some areas, the scheme underperformed in others and saw delays in incentive payouts.

More About the News

• Out of the $23 billion allocated, only $1.73 billion (8%) has been disbursed as of October 2024.
• $151.93 billion worth of goods have been produced under the scheme—just 37% of the original target. Firms like Foxconn, Reliance, and Adani faced delays, unmet targets, or non-compliance.
• Hence, the government has declined requests to extend production deadlines or add new sectors to the scheme.

About the PLI Scheme

• Lauch: In 2020 under the Ministry of Commerce & Industry with an outlay of ₹1.97 lakh crore.
• Sectors Included: It covers 14 sectors (Mobile, Pharma, Auto, ACC Battery, Telecom, White Goods, Solar, etc.)
• Objectives:  It offers incentives to eligible firms on incremental sales for five years as part of the Make in India initiative.
  • It aims to reduce India’s dependence on foreign countries like China and increase employment in labor-intensive sectors.
  • Raise manufacturing’s share in GDP to 25% by 2025
• Incentive Mechanism: 4–6% on incremental sales over a base year.
  • Applicable to both domestic and foreign companies registered in India.

Benefits of PLI Scheme

• Electronics Success: India produced $49 billion worth of mobiles in FY 2023–24; Apple now manufactures high-end models in India.
• Pharmaceutical Growth: Exports nearly doubled to $27.85 billion from a decade ago.
• Boosted FDI inflow, helped develop core industries, and supported India’s ‘China Plus One’ strategy.
• Encouraged production in strategic sectors (e.g., semiconductors, solar modules).

Issues and Concerns

• Low Disbursement: Only 8% of incentives disbursed despite meeting targets.
• Delays in Subsidies: They are not released on time, eventually affecting cash flow.
• Unmet Targets:  Many firms failed to initiate or scale up production.
• Red Tapism: Bureaucratic hurdles and rigid compliance conditions.
• No GDP Boost: Manufacturing share fell from 15.4% to 14.3% (2020–2024).

Source: TH