India's PLI Scheme

The PLI Scheme stands for the ‘Product Linked Incentive’ scheme which is a new development policy created and adopted by the Government of India in support of the “Make in India” policy. The Production Linked Incentive Scheme for Large Scale Electronics Manufacturing 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 the electronics sector.

First Round of the PLI Scheme for Large-Scale Electronics Manufacturing:

The scheme extends an incentive of 4% to 6% on incremental sales (over the base year) of goods manufactured in India. The Scheme is open for applications for 4 months initially and may be extended. Support under the Scheme is provided for a period of 5 years after the base year. The Small Industries Development Bank of India (SIDBI) has been appointed as the Project Management Agency (PMA) for the PLI scheme. The scheme came into effect on 1st April 2021.

The PLI Scheme will be implemented within the overall financial limits of ₹ 12,195 Crores only (Rupees Twelve Thousand One Hundred and Ninety-Five Crore only) for implementation of the Scheme over 5 years. For the MSME category, financial allocation will be ₹1000 Crores. Investments made by successful applicants in India from 1st April 2021 onwards and up to Financial Year (FY) 2024-2025 are eligible, subject to qualifying incremental annual thresholds. The support under the Scheme is provided for five years, i.e. from FY 2021-22 to FY 2025-26. The Scheme is open to both MSME and Non-MSME Companies including Domestic and Global Companies; manufacturers with products with Indian technology are encouraged to apply.

Second Round of the PLI Scheme for Large-Scale Electronics Manufacturing:

After the success of the first round of the PLI Scheme in attracting investments in mobile phone and electronic component manufacturing, the proposal for accepting applications under the Second Round of the PLI Scheme has been approved by the Competent Authority. The target segment for this round is Specified Electronic Components.

Under the Second Round, incentives of 5% to 3% shall be extended on incremental sales (over the base year i.e. 2019-20) of goods manufactured in India and covered under the target segment, to eligible companies, for four years.

The Application Window shall be open until 31.03.2021 initially and may be extended and/or reopened based on the response from the industry. Incentives under the Second Round of the PLI Scheme shall be applicable from 01.04.2021.

HOW DID THE PLI SCHEME ORIGINATE?

The electronics industry permeates all sectors of the economy and has cross-cutting economic and strategic significance. recognising the sectors, unique dynamics, significant opportunities and structural challenges the government of India notified the national policy on electronics NPE 2019.

The NPE 2019, aims to position India as a global hub for electronics systems, 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.

India has become an attractive destination for investments in the ESDM sector and mobile handset manufacturing has emerged as a flagship segment. Major brands have either already set up their manufacturing facilities or have subcontracted manufacturing to electronics manufacturing services EMS companies operating from India. An estimated 6.7 lakh persons are employed directly and indirectly by facilities, manufacturers, cellular mobile phones and components thereof.

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

PRODUCTION: Over INR 10.5 Lakh Crore in the next 5 years.

• Mobile phone (invoice value INR, 15,000 and above): Proposed production of over INR, nine lakh crore.

• Mobile phone (domestic companies): proposed production of over INR 1.23 lakh crore.

• Specified electronic components: Proposed production of over INR 15,700 crore.

EXPORT: Out of total production, around 60% (INR 6.5 lakh crore) will be contributed by export in the next five years.

INVESTMENT: Around INR, 11,000 crore.

EMPLOYMENT: Over 2 Lakh (0.2 million) direct employment is likely to be generated in the next five years, along with additional indirect employment of nearly 3 times.

DOMESTIC VALUE ADDITION: expected to grow from the current 15-20% to 35-40% in the 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 capacity to India, thereby creating large economies of scale which will drive the supply chain ecosystem into the country.

The scheme will lead to new investments and increase tax to the news in the electronics manufacturing sector in addition to the direct employment generation that occurs as a result of the scheme, indirect employment generation will be about three times as per industry estimates. The scheme is expected to contribute significantly to achieving a USD 1 trillion digital economy and a US 5 trillion GDP by 2026.

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 a Self-Made India.

Article By:

Sreya Nambiar

(Writing Associate, TAO)

Design By:

Anushka Mishra

(Design Associate, TAO)