Production Linked Incentive Scheme

PRODUCTION LINKED INCENTIVE SCHEME

Production Linked Incentive Scheme (PLI): Accelerating India’s Manufacturing Growth

Production Linked Incentive Scheme (PLI) is a cornerstone to boost domestic manufacturing and attract foreign investments. This ambitious initiative aims to enhance India's global competitiveness in various sectors, including electronics, pharmaceuticals, automobiles, textiles, white goods, and many more. PLI scheme focuses on key sectors that have the potential to drive India's economic growth. Financial incentives have been provided on incremental sales from products manufactured in India over the base year. PLI seeks to propel India towards becoming a global manufacturing hub in sunrise and strategic sectors. To align with the vision of our Hon'ble Prime Minister, Shri Narendra Modi, of making India' Atmanirbhar Bharat', Production Linked Incentive (PLI) Schemes for 14 key sectors have been announced with an outlay of Rs. 1.97 lakh crore.

The 14 key sectors are:

(i) Mobile Manufacturing and Specified Electronic Components
(ii) Critical Key Starting Materials/Drug Intermediaries & Active Pharmaceutical Ingredients
(iii) Manufacturing of Medical Devices
(iv) Automobiles and Auto Components
(v) Pharmaceuticals Drugs
(vi)  Specialty Steel
(vii) Telecom & Networking Products
(viii) Electronic/Technology Products
(ix) White Goods (ACs and LEDs)
(x) Food Products
(xi) Textile Products: MMF segment and technical textiles
(xii) High-efficiency solar PV modules
(xiii) Advanced Chemistry Cell (ACC) Battery
(xiv) Drones and Drone Components

PLI – Game Changer to Unlock Potential

In the rapidly evolving markets, companies are facing fierce competition and are constantly looking for innovative strategies to get a competitive advantage and boost their productivity. Leveraging the potential of the PLI scheme can significantly benefit businesses, boosting their growth and ultimately driving economic progress. The PLI scheme is the game changer for the country's manufacturing sector as it can increase the potential of key sectors by encouraging them to increase production and investments. PLI scheme's sectoral focus and potential impact on employment generation and economic growth make it a significant step towards realizing India's aim for a $5 trillion economy.

The PLI scheme is expected to have a transformative impact on India's manufacturing landscape. The scheme incentivizes companies to invest in the areas where India can become a global leader. The purpose of the scheme is to attract investments in key sectors and cutting-edge technology, ensure efficiency, bring economies of size and scale in the manufacturing sector, and make Indian companies and manufacturers globally competitive. By encouraging domestic manufacturers, the scheme aims to boost India's global exports. This will not only increase foreign exchange earnings but will also reduce import bills, improve the cost competitiveness of domestically manufactured goods, and help create more job opportunities in the country. It will also encourage investments in research and development, leading to innovation and technological advancements in the supported sectors.

Incentivizing growth for Businesses

The PLI scheme is expected to have a cascading effect on the country's MSME ecosystem. Out of the 733 applications selected under various PLI Schemes, 176 MSMEs are among the PLI beneficiaries in sectors such as Bulk Drugs, Medical Devices, Pharma, Telecom, White Goods, Food Processing, Textiles, and drones. As of September 2022, the PLI scheme for Large Scale Electronics Manufacturing (LSEM) attracted investments of INR 4,784 crore, with a total production of INR 2,03,952 crore, while also generating 41,000 additional jobs. In the medium term, the scheme is expected to bring in additional production to the tune of INR 10.69 lakh crore and generate 700,000 jobs.

Shri Rajesh Kumar Singh, Secretary, DPIIT, said that due to PLI Schemes, there was a significant increase of 76% in FDI in the Manufacturing sector in FY 2021-22 (USD 21.34 billion) compared to the previous FY 2020-21 (USD 12.09 billion). "We have been able to increase the value addition in mobile manufacturing to 20% within three years whereas countries like Vietnam achieved 18% value addition over 15 years and China achieved 49% value addition in over 25 years. Seen in this perspective, it is a big achievement", he added. Import substitution of 60% has been achieved in the Telecom sector, and India has become almost self–reliant in Antennae, GPON (Gigabit Passive Optical Network) & CPE (Customer Premises Equipment). The drone sector has seen a seven-times jump in turnover due to the PLI Scheme, which consists of all MSME Startups.

PLI aims to create national manufacturing champions and to create 60 lakh new jobs and an additional production of 30 lakh crore during the next five years. Indian Government is providing different outlays for different sectors, as depicted in the chart.

Shaping India’s Future
With the outlay of INR 25,938 Cr., the PLI scheme proposes a financial incentive of up to 18% to boost domestic manufacturing in the automobile sector. The scheme has been successful in attracting a proposed investment of INR 74,850 Cr. against the target estimate of investment of INR 42,500 crore for five years. The production-linked subsidy is provided for setting up manufacturing facilities for Advanced chemistry Cell (ACC) Battery Storage in India, with a total manufacturing capacity of 50 GWh for five years. The Ministry of Steel has signed 57 MoUs with 27 companies, which is expected to generate an investment of INR 30,000 Crores with an additional capacity creation of about 25 MT of specialty steel.
The PLI scheme is likely to demonstrate positive results in increasing manufacturing, job creation, and export. For instance, the PLI scheme is likely to facilitate the expansion of food processing capacity by nearly INR 30,000 crores and create additional direct and indirect employment opportunities for about 2.5 lakh persons by the year 2026-27. Similarly, in the pharmaceutical sector, the PLI scheme aims to boost domestic production of critical drugs and reduce dependence on imports. 
While the PLI scheme holds immense potential, its success will depend on effective implementation, streamlining approval processes, and quick disbursal of the incentives. Additionally, continuous monitoring and evaluation of the scheme’s impact will be necessary to make necessary adjustments and improvements.


(A) PLI for Bulk Drugs
Indian pharmaceutical industry is the 3rd largest in the world contributing 3.5% of total drugs and medicines exported globally. But the country is highly dependent on imports of basic raw material, viz. bulk drugs that are used to produce finished dosage formulations. To ensure greater resilience to external shocks, enforce greater drug security and boost the capacity for domestic production for critical bulk drugs, government is providing financial incentives under PLI scheme between FY 2020-21 to FY 2029-30.
Eligibility – 
•    The Applicant for the purpose of the Scheme shall be any Proprietary Firm or Partnership Firm or Limited Liability Partnership (LLP) or a Company registered in India proposing to manufacture eligible products and making an application for seeking approval under the Scheme
•    The project shall be a greenfield project
•    The Net Worth of the Applicant (including that of Group Companies), as on the date of application, shall not be less than 30% of the total committed investment
•    The proposed Domestic Value Addition (DVA) by the applicant shall be at least 90% in case of fermentation based product and at least 70% in case of chemical synthesis based product
•    The applicant should not have been declared as bankrupt or willful defaulter or reported as fraud by any bank or financial institution or non-banking financial company

Incentive – 
A financial incentive will be given to eligible manufacturers of identified 41 eligible products which covers 53 APIs, on their incremental sales over the base year 2019-20 for a period of 6 years. The rates of incentives will vary for Fermentation based products and Chemically Synthesized products.
Fermentation products:
FY 2022-26: 20%
FY 2026-27: 15%
FY 2027-28: 5%
 
Chemically synthesized products:
FY 2021-27: 10%
Support under the scheme shall be provided only to manufacturers of critical KSMs/DIs and APIs registered in India subject to committed investment and minimum annual production capacity.

(B)       PLI for Pharmaceuticals Manufacturing
To enhance India’s manufacturing capabilities and to create global champions in pharmaceutical sector, government is providing certain financial benefits that one could avail between FY 2020-21 to FY 2028-29. The manufacturers of pharmaceutical goods registered in India will be grouped based on their Global Manufacturing Revenue (GMR) to ensure wider applicability of the scheme across the pharmaceutical industry and at the same time meet the objectives of the scheme. Base year for the scheme is 2019-20.

Eligibility – 
The qualifying criteria for the three groups of applicants will be as follows:

Groups

Global Manufacturing  Revenue(GMR)

 Financial Outlay (Total 15,000 cr.)

A

More than or equal to 5,000 cr. 11,000 cr.

B

Between 500 cr. to 5,000 cr. 2,250 cr.

C

Less than 500 cr. (include sub-group for MSME) 1,750 cr.

 

Incentive –

  The scheme shall cover pharmaceutical goods under three categories:

Categories Pharmaceutical goods Rate of Incentive on incremental sales (over base year 2019-20)

1

Bio-pharmaceuticals, Complex generic drugs, Patented drugs or drugs nearing patent expiry

 

FY 2022-23 to FY 2025-26 -10%
FY 2026-27 - 8%
FY 2027-28 - 6%

2

Active Pharmaceutical Ingredients / Key Starting materials / Drug Intermediates

 

FY 2022-23 to FY 2025-26 -10%
FY 2026-27 - 8%
FY 2027-28 - 6%

3

(Drugs not covered under Category 1 and Category 2) - Repurposed drugs, Autoimmune drugs, anti-cancer drugs, anti-diabetic drugs, anti-infective drugs, cardiovascular drugs, psychotropic drugs and anti-retroviral drugs, In-vitro diagnostic devices, Other drugs as approved, Other drugs not manufactured in India FY 2022-23 to FY 2025-26 - 5%
FY 2026-27 - 4%
FY 2027-28 - 3%

 

(C) PLI for White Goods (Air Conditioners and LED Lights)
White goods refer to heavy consumer durables or appliances such as washing machines, air conditioners, stoves, refrigerators. To bring innovation and digital transformation in the nation, government is providing the financial incentive on incremental turnover of goods sold in India and exported to global markets for a period of 5 years (2021-22 to 2028-29).
An applicant may opt for any one of the following initial investment (gestation) periods:
i)    1st April 2021 to 31st March 2022
ii)    1st April 2021 to 31st March 2023
The Scheme is fund limited with total financial outlay of INR 6,238 cr. only:

1.    For Air Conditioners: Net incremental sale of the eligible product(s) up to 5 times of the cumulative threshold investment in the previous financial year
2.    For LED Lights: Net incremental sale of the eligible product(s) up to 6 times of the cumulative threshold investment in the previous financial year

Eligibility –
•    Indian/ Foreign/ Joint Venture company
•    An applicant must possess setting up of greenfield and brownfield project for manufacturing of eligible products 
•    Subject to the thresholds of net incremental sales of eligible products for the respective financial year over the base year and cumulative incremental investment in the preceding financial year
Incentive -
The Scheme shall extend an incentive of 4% to 6% on incremental sales (net of taxes) over the base year (2019-20) of goods manufactured in India and covered under target segments, to eligible companies, for a period of five years subsequent to the base year and one year of gestation period.

(D) PLI for Food Processing
To promote "Brand India" globally, the PLI Scheme for Food Processing Industry supports companies with branding and marketing abroad, boosting emergence of strong Indian brands. The tenure of the Scheme is six years from Financial Year 2021-22 to Financial Year 2026-27 with the total outlay of Rs. 10,900 crores.
The scheme covers four food product segments viz. Ready to Cook/ Ready to Eat (RTC/ RTE) foods including Millet products, Processed Fruits & Vegetables, Marine Products and Mozzarella Cheese. Innovative/ Organic products of SMEs in these segments, including Free Range - Eggs, Poultry Meat, Egg Products, are also covered.
Eligibility –
•    Applicants engaged in manufacturing of food products in India & sales of such products covered under the target Segments. SME Applicants should engage in such activities for innovative/ organic food products
•    Applicants shall be Proprietary Firm or Partnership Firm or Limited Liability Partnership (LLP) or a Company registered in India, Co-operatives; and Small & Medium enterprises.
Incentive – 
Incentive ranging from 4% to 10% across different financial years is provided on incremental sales. Companies can avail 50% financial incentives for expenditure on international branding, capped at 3% of food product sales or ₹50 Crore per year, whichever is less.

(E) PLI for Textile Sector
To regain India’s dominance in Textile sector and to promote the production of MMF Apparel, MMF Fabrics and Products of Technical Textiles, Indian Government is offering incentives worth Rs 10,683 crore through the PLI Scheme during the next five years. Tenure of the scheme is from 24th Sep 2021 to 31st March 2030.
Scheme Part 1 - Any person including Company/Firm/LLP/Trust willing to create a separate manufacturing company under Companies Act 2013, and invest minimum ₹300 Crore (excluding land and administrative building cost) to manufacture Notified Products. Such company will be eligible to get incentive when they achieve a minimum of ₹600 Crore turnover by manufacturing and selling the Notified products by the first Performance Year.
Scheme Part 2 - Any person including Company/Firm/LLP/Trust willing to create separate manufacturing company under Companies Act 2013, and invest minimum ₹100 Crore (excluding land and administrative building cost) to manufacture Notified Products. Such company will be eligible to get incentive when they achieve a minimum of ₹200 Crore turnover by manufacturing and selling the Notified products by the first Performance Year
Eligibility - 
•    Selected participants meeting the criteria of threshold investment and incremental turnover shall be eligible to claim incentive.
Incentive -
Incentives ranging from 7% to 15% across different financial years will be provided. Also in a particular year, incentive will be provided on achieving 25% incremental turnover over the immediate preceding year’s turnover, subject to a cap of maximum 35% admissible incremental turnover.

(F) PLI for Medical Devices Manufacturing

India is counted amongst top 20 global medical devices market and is 4th largest market in Asia. To attract large investment and encourage growth in medical devices segments such as cancer care devices, radiology and imaging devices, Indian Government is providing the following financial benefit. Tenure of the scheme is from FY 2020-21 to FY 2025-26.

Eligibility –
•    Support under the scheme shall be provided only to companies engaged in manufacturing of target segments having Net Worth (of applicant company including that of Group Companies) greater than Rs. 18 crores
•    Exclusive for greenfield projects
•    Subject to the threshold of incremental investment and incremental sales of manufactured goods
•    Applicant should not have been declared as bankrupt or defaulter or reported as fraud by any financial institution

Target segments under PLI - 
•    Cancer care / Radiotherapy
•    Radiology, Imaging and Nuclear Imaging Devices
•    Anaesthetics, Cardio-Respiratory and Renal Care 
•    All Implants including implantable electronic devices like Cochlear Implants and Pacemakers
Incentive –
Incentive of 5% on incremental sales (over Base Year: FY 2019-20) of goods manufactured in India