December 5, 2022
Indian Government Proposes To Increase PLI Scheme's Financial Outlay By 2.5 times To INR 19,000 Cr

Indian Government Proposes To Increase PLI Scheme's Financial Outlay By 2.5 times To INR 19,000 Cr

The Indian Government has intentions to increase the incentive rates by two folds as well as increase the financial outlay of the Production Linked Incentive or PLI scheme by about 2.5 times, to almost INR 19,000 Crore, to entice international corporations like Apple Inc, Dell Inc, HP Inc, Samsung Electronics Co Ltd, and ASUSTek Computer Inc to expand their production operations in India.

As per certain sources, the Production Linked Incentive (PLI) for Information Technology (IT) Hardware 2.0 amended scheme, according to a draft that will be distributed to key stakeholders for responses, will provide incentives of 4% to 5.75% for 5 years instead of the current 1% to 4% for 4 years. This will make the financial outlay cost up to INR 19,000 Crore instead of INR 7,350 Crore.

Following discussions with the industry, the updated scheme’s draft will be presented to the Cabinet for approval. Every corporation chosen under the current programme is eligible to participate in Production Linked Incentive (PLI) 2.0. Nevertheless, the localization schedule and other requirements for the scheme’s benefits will not change. The modified scheme’s draft states that enterprises must integrate localization of components to receive further benefits.

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According to sources, the industry had requested incentives from the Indian Government for as many as 8 years to make sure that small-scale enterprises have a competitive edge across the globe. They even looked for incentives in the 7% to 8% range to increase the possibility of manufacturing in the country.

To benefit, multinational corporations must produce around INR 1,000 Crore and invest INR 50 Crore in the initial year. The investment for local businesses is about INR 4 Crore, and the additional production must be INR 50 Crore in value.

In the present electronics hardware Production Linked Incentive (PLI), the median incentive provided to applicants is quite less. The absence of duties on electronic hardware imports is the 2nd reason for subpar performance. Therefore, the applicants must rival globally on both quality and price. Hardware firms have pointed fingers at the scheme’s low incentive structure as the cause of its lack of success since 2.5% of the average incentive rate doesn’t support moving the manufacturing of hardware goods from Vietnam or the People’s Republic of China.

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