News & Analysis

Course Correction in PLI Schemes

Having fulfilled its early objectives, the government appears to be keen to course correct the scheme across some specific sectors

The federal government is currently researching data around the production-linked incentive (PLI) schemes across 14 industry sectors and would consider course correction on those that have shown little progress. A decision, however, could come only towards the close of the current financial year. 

While eight of the 14 sectors such as mobile manufacturing, information technology, hardware, pharmaceutical drugs, bulk drugs, medical devices, telecommunications, food products, and drones have the PLI scheme, the others like steel, textiles, batteries, white goods, solar photovoltaic cells and autos are yet to get the benefits.  

Is there more smoke and less fire?

Officials confirmed that detailed analysis was currently underway to check the return on investments that these sectors have generated, specifically in terms of export earnings and job creation. The Department of Promotion for Industries and Internal Trade (DPIIT) was coordinating this effort with the relevant ministries. 

At a media interaction, DPIIT secretary Rajesh Kumar Singh said the ministries need to look at course corrections where disbursements are low while relaxations would be called for when beneficiaries aren’t meeting the thresholds and some individual schemes too may require modifications to get the best out of them. 

In fact, the government is convening a meeting of the relevant ministries and stakeholders of the PLI scheme on June 27 to review progress and understand the challenges in cases where the outcomes have not been as envisaged. For now, the review will focus on six sectors where the scheme hasn’t moved so that budgetary allocations could be used better in the future. 

Challenges to fund utilization persists

During the previous financial year, claims under the various PLI schemes stood at Rs.3430 crore of which beneficiaries from eight sectors have already received Rs.2874 crore. However, the fact remains that this amount is barely 1.5% of the Rs.1.97 trillion that was allocated five years ago for the PLI scheme. 

Singh appeared confident that the amount could be utilized in toto over the next two years and hopes that the six sectors where the scheme hasn’t kicked off, there could be some movement. In fact, officials also noted that some incentives were supposed to be handed out in the second or third year after the implementation.  

In addition, there has been growing demand from the industry for similar schemes with sectors such as toys, footwear and new-age motorbikes seeking government approval. Reports indicate that these proposals are at an advanced stage of consideration. Of course, one wonders if the current allocation would be able to tackle this additional demand. 

While smartphones, IT hardware, pharma and bulk drugs, medical devices and telecom have done well over the past couple of years, the rest haven’t responded with the same quantum of success. It remains to be seen whether the government tightens up these sectors or would rather offer it to newer ones that could use them better. 

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