What are the challenges facing the PLI scheme?

To boost manufacturing, generate employment, increase exports and cut imports, the government had launched the Production-Linked Incentive, or PLI scheme.

At present, it covers 14 significant sectors and involves a total outlay of Rs 3 trillion.

And the government initiative has started showing clear results. This week, Apple’s vendors have made a commitment of a minimum incremental production of Rs 25,000 crore of mobile devices in FY23 beginning from April 1. It is a threefold jump in the commitment of minimum incremental production over FY22.

But how is the PLI scheme progressing in other sectors and what are the challenges ahead?

Things are not going according to plan in one sector, at least. On 30th March, a financial daily reported that of the 14 eligible firms, only two or three were likely to meet their first-year targets under the PLI scheme for IT hardware for the financial year ending 31st March.

According to the report, some of the companies concerned blamed the situation on inadequate sops under the scheme. Meanwhile, others blamed the ongoing chip shortages and global supply chain disruptions.

While the current corpus for IT hardware PLI is Rs 7,350 crore, spread over 4 years, members of the industry has told the financial daily that it wants the corpus to be expanded to up to 20,000 crore rupees.

According to the report, the industry believes that additional incentives are needed to make India more attractive than China and Vietnam.

Issues regarding allocations have cropped up in the past, too. In November last year, the department of pharmaceuticals had urged the government to provide additional funds of about 3,000 crore rupees under the PLI scheme for drugs.

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Citing a senior government official, Business Standard recently reported that a decision on the demand would be taken once the funds allocated to the pharmaceutical department are utilised.

The Ministry of Electronics and Information Technology is in charge for the PLI scheme for large-scale electronics manufacturing, IT hardware and IoT devices. Business Standard had earlier reported that the ministry had informed the authorities concerned that it would require more than Rs 22,900 crore for all the schemes that it is running. However, the budget available with the ministry is just Rs 2,923 crore. The additional amount would be used to offer more incentives to companies and boost exports.

Business Standard has recently reported that the government will undertake a two-stage review of the PLI scheme. During the review, the scheme's progress and implementation across various sectors will be discussed. Subsequently, the possibility of reallocation to government departments and ministries, which need more funds, will be assessed.

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