Extend PLI scheme to all MSMEs amid Covid-19 pandemic, says NITI Aayog

Niti Aayog has recommended that the production-linked incentive (PLI) scheme be extended across sectors for medium-sized industries with investment above Rs 100 crore. This, it said, would provide support to micro, small and medium enterprises (MSMEs) battered by the Covid-19 pandemic.

According to a senior government official, the policy think tank of the Government of India has written to various ministries for expanding the PLI scheme for medium-scale industries to make the country self-reliant and lift domestic manufacturing.

To integrate India’s manufacturing ecosystem with global supply chains, the government announced the PLI scheme — that entails providing incentives to firms on incremental sales for five years over the base year of 2019-20 — for 13 sectors.

The recently announced PLI scheme for the telecom sector extended the incentives to MSMEs. The minimum investment threshold has been kept at Rs 10 crore (with incentives from 7 per cent to 4 per cent of incremental sales) and Rs 100 crore for others (with incentives from 6 per cent to 4 per cent).

The PLI scheme for the pharmaceutical (pharma) sector has also announced incentives for MSMEs by categorising them under a separate category.

The Aayog has suggested that the existing PLI schemes may not be amended, but wherever possible, new guidelines will be issued for expanding its scope to medium-sized industries.

Besides pharma, drug intermediaries, medical devices, mobiles, tablets, electronics, and telecom, the government will announce the PLI scheme for seven more sectors.

“In sectors like electronics, the higher investment threshold and incremental sales target can be reduced, given not many domestic industries have the wherewithal to invest that kind of capital,” said the official. 

The recommendations from the Aayog have been to extend this for those making fresh investments of a lower quantum. This would help the PLI scheme in covering all levels of businesses, proposed the Aayog.

The biggest challenge continues to be access to capital, said Divakar Vijayasarathy, managing partner at DVS Advisors. The regulatory push through the extension of the scheme for MSMEs can be a game changer, said Vijayasarathy. “Banks would be more forthcoming in advancing loans, and MSMEs may also be able to raise private equity which was difficult earlier,” he added.

The proposals by the Aayog were sent to the ministries after several industries demanded that the ambit of the PLI scheme be expanded, said the official. The planning body had also suggested that the PLI scheme for the pharma sector be extended to brownfield projects, and the same has been accepted by the Department of Pharmaceuticals (DoP). The scheme was earlier available only to greenfield projects, but the pharma industry had sought the scheme’s extension to businesses with a ready infrastructure.

The Aayog’s recommendation to extend the scheme to brownfield projects was aimed at increasing domestic manufacturing, and augmenting the industry’s existing capacity, added the official. The DoP saw merit in the Aayog’s proposal, and has announced the changes recently, he said.