What is PLI scheme? How does the incentive work?


PLI scheme; a production-linked-incentive scheme that is planned 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 the scheme was introduced for 14 other sectors. This scheme was introduced to promote the India’s Atmanirbhar Bharat campaign. 

The objective of the scheme is to invite foreign companies to set up units in India, it also aims to encourage local companies to set up or expand existing manufacturing units and also to generate more employment, cut down the country’s reliance on imports from other countries. Every manufacturing company, either Indian or have a registered unit in India will be eligible to apply for the scheme.

The government of India has rolled out this scheme with an outlay of about ₹2 lakh crore across 14 sectors, including pharma, automobiles and auto components, textiles, food products, white goods, high-efficiency solar PV modules, advanced chemistry cell, and specialty steel.

With the PLI scheme, the government targets at achieving the following:

  • Government targets to make India an integral part of the global supply chain & eventually enhance exports.
  • India is anticipating having a USD 1 trillion digital economy by year 2025 as it is looking forward to the increase in electronics demand.
  • 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 leading manufacturing sectors in the world. This scheme shall attract large investments in the manufacturing sector and boost domestic manufacturing.
  • India is the second-largest producer of steel in the world. Introducing it under the PLI scheme will benefit the country as it can help in expanding export opportunities.
  • In similar way, 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.

The incentives planned under this scheme:

  • The incentives, calculated on the basis of incremental sales, range from 1% for electronics to 20% for technology products; for the manufacturing of critical key starting drugs and certain drug intermediaries.
  • Some of the sectors such as chemistry cell batteries, textile products, and the drone industry, the incentive to be given will be calculated on the basis of sales, performance, and the local value addition done by the company over the period of five years.

Further to add here, to ensure the overall turnaround of the project; a group has been allocated to identify the bottlenecks in PLI schemes, coordinate between states and companies for faster approvals, and evaluate and ensure quick investments.

Watch this interesting conversation between Tofler’s CEO & founder “Ms Anchal Agarwal” and Mr. Chandramowli Srinivasan ex-CFO of a listed ball bearing manufacturing company; talking about the PLI scheme and how SMEs can get benefit from it.