Background

Production Linked Incentive (‘PLI’) Schemes is a cornerstone of the Government’s push for accomplishing the vision of Atmanirbhar Bharat. The objective is to make domestic manufacturing globally competitive and to create domestic champions in manufacturing. The strategy behind the Scheme is to offer financial incentives to boost manufacturing and attract large scale investments.

The Scheme has been a game-changer in attracting industries from certain geographic locations to countries like India, where they can participate in both the domestic and export markets. While it invites foreign companies to set up their units in India, the Scheme also encourages domestic enterprises to expand their production units. The flourishing of local manufacturing will enable India to be able to compete in global markets in the long run. By increasing manufacturing in various sectors, India can also reduce the unemployment ratio and also create skilled manpower.

The PLI Scheme was conceived and launched in March 2020 to scale up domestic manufacturing capability to up to 30 lakh crores, substitute higher imports while also creating 60 lakh new jobs. The Scheme initially targeted three industries viz. Mobile and Allied Component manufacturing; Electrical Component manufacturing and Medical Devices. Later, 14 key sectors were brought under the Scheme with an outlay of Rs 1.97 lakh crore including automobile and auto components, electronics and IT hardware, telecom, pharmaceuticals, solar modules, metals and mining, textiles and apparel, white goods, drones, and advanced chemistry cell batteries. By targeting these sectors, the PLI Scheme aims to drive investment in high-tech industries, improve domestic manufacturing capabilities, and enhance India’s global competitiveness. An additional allocation of Rs 19,500 crores was made towards PLI for solar PV modules in the Budget 2022-23. The Indian Government upscaled the allocation for the PLI Scheme to Rs. 6,200 crores during the interim budget for FY 2024-25 marking an increase of 33% as compared to the previous year’s estimate of Rs. 4,645 crores. The PLI Scheme offers cash incentives to businesses for enhancing their domestic production while also focusing on cutting import costs and boosting the cost competitiveness of local products. The amount of incentive varies from sector to sector. The Scheme  commenced in 2020-21 to be effective for five years till 2025-26. The identified beneficiaries are required to commit to a certain minimum investment in India.

 

Key Objectives of PLI Schemes are:

Large-scale manufacturing capacities

The grant of incentives is directly linked to production capacity/ incremental turnover, compelling investors to create large scale manufacturing facilities. This should lead to improvements in industrial infrastructure, benefiting the industry at large. Thus, its effects are expected to be felt by manufacturers of all sizes, even if they are not direct recipients of the incentives.

Import substitution and increase in exports

Currently, there is heavy reliance on imports for raw material and finished goods. PLI Schemes intend to plug this gap by enabling domestic manufacture of goods. This would trigger a two-fold impact — an immediate reduction in reliance on imports and in the long term, a higher quantum of exports from India.

Employment generation

It is evident that envisaged large-scale manufacturing would require abundant manpower. Hence, this initiative should also enable utilization of the country’s ample human capital.

Key Eligibility Criteria of the PLI Scheme

Companies that are registered in India and are involved in the manufacturing of goods covered under the target segments of the Scheme, can apply under the PLI Scheme. Eligibility under the Scheme shall be subject to thresholds of Incremental Investment (covered under Target Segments) over the base year as defined. Further, companies need to satisfy certain additional eligibility criteria which may vary from scheme to scheme in terms of Gross Management Revenue (GMR), Net Worth, Incremental Sales, Domestic Value Addition (DVA), etc

 

An applicant must meet threshold criteria (i.e. incremental investment) i.e. a minimum of Rs. 10 crores (MSME) or Rs. 100 crores (Others) and a maximum of Rs. 1,000 crores, 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. 

 

The applicant can operate existing or new manufacturing unit at one or more locations in the country.

 

Any additional expenditure incurred by companies on plant, machinery, equipment, research and development and transfer of technology for manufacture in the target segments will be eligible for the Scheme.

 

Incentives Offered under PLI Schemes:

The PLI Schemes provide eligible manufacturing companies incentives ranging from 4% to 6% on incremental sales over the base year of 2019-20 for a 4-6 year period. It is like a subsidy being provided by direct payment for domestically manufactured goods by eligible manufacturing companies.

Sector Wise Details of PLI Schemes:

Sectors

Concerned Department

Total Financial Outlay (Rs. In crores)

Last Date of Application

Specialty Steel 

Ministry of Steel 

6,322  

 

15 September 2022 31 January 2025 (Scheme 1.1)

Second Edition of Existing PLI Schemes:

Specialty Steel: The PLI Scheme for speciality steel approved by the Union Cabinet in July 2021 has received 79 applications from 35 companies, resulting in an investment of Rs 46,020 crores. The government has launched second edition of the PLI Scheme for specialty steel on 6 January 2025 and also seeks to cover steel used in some defence equipment and automobiles.

 

 Conclusion:

  1. The PLI Scheme is a big step towards India becoming self-reliant. The government is anticipated to extend some of the existing PLI Scheme in order to give boost to the Make in India initiative. As per news reports, as on 18 December 2024, 764 applications have been approved under PLI Scheme. 
  2. Further, the implementation of PLI Scheme has led to actual investment of nearly Rs. 1.46 lakh crore till August 2024 (as per the Year End Review Press Release dated 20 December 2024), production or sales of Rs. 12.5 lakh crore of eligible products and employment generation of over 9.5 lakh individuals. Over 1300 manufacturing units established across 14 sectors and 27 States/UTs under PLI Scheme.
  3. PLI Scheme has witnessed exports surpassing Rs. 4 lakh crores, with significant contributions from sectors such as Large-Scale Electronics Manufacturing, Pharmaceuticals, Food Processing, and Telecom & Networking products.
  4. 176 MSMEs are among the PLI beneficiaries in sectors such as Bulk Drugs, Medical Devices, Pharma, Telecom, White Goods, Food Processing, Textiles & Drones. Several MSMEs are serving as investment partners/ contract manufacturers for large corporates.
  5. Further, the Government is likely to extend fiscal incentives for production of toys, bicycles and leather and footwear as it looks to expand the Scheme to cover more high-employment potential sectors. This would necessitate an additional investment of Rs. 35,000 crores over time.
  6. Government initiatives such as the PLI Scheme will undoubtedly support home grown businesses in expanding its manufacturing capabilities, boosting exports and bringing large-scale manufacturing to India. This is an incredible opportunity for the manufacturing economy to become self-sufficient and produce high quality, globally competitive goods.

 

 

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