Production Linked Incentives Announced for 10 Sectors

Last Updated at: Feb 03, 2021
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Production Linked Incentives Announced
According to the Ministry of Electronics and Information Technology, Samsung, Foxconn Hon Hai, Winstron and Pegatron are among the international manufacturers approved for incentives under the PLI scheme. Domestic players such as Lava and Micromax have also been approved. In the upcoming budget 2021 session, the Government is expected to expand the scheme to more sectors like footwear, chemicals, and agrochemicals.

 

Production Linked Incentives announced for ten business sectors – Here’s how to check if your business benefits

The Union Cabinet has recently approved 10 sectors for such a scheme. These are large to reduce India’s dependence on imports while also enhancing the manufacturing base in India. Further, most of the sectors are labour-intensive and are therefore expected to create greater employment in India. This scheme is approximately going to cost ₹1.45 trillion to the government. In this post, we examine what these sectors are, and the advantages for your business. 

What is a Production linked incentive scheme?

Production linked incentive is an outcome or output-oriented scheme. Here, the incentive b6 the government will pay proportionate to the manufacture of the goods. It is also linked to incremental sales from such products made in India. Therefore, under this scheme, cash incentives would be provided for five to seven years to specified sectors. 

Benefits to a business in availing the Production Linked Incentive scheme  

  • Greater access to financing for research and development in newer areas 
  • Investment for plant, machinery and up-gradation of capital assets 
  • Moreover, reduced dependence on imports 
  • Promotion of domestic manufacturing, and therefore, reduced costs 
  • Promotion of exports 
  • Diversification of goods 

Production linked incentives for electronics manufacturing, technology products and Mobile manufacturing

With an aim to promote large scale electronics, the government would incentivise companies setting up a manufacturing base in India. Companies in the electronics value chain such as mobile phones. electronic components and semiconductor packaging will cover. 

In addition, it also covers the following – 

  • Display Fab
  • Laptop/ Notebooks
  • Servers
  • IoT Devices
  • Specified Computer Hardware

An incentive of 4-6% over the base year of goods manufactured in India for five years would be available

Of all ten sectors, the incentive for the electronics industry is the highest, amounting to ₹41,000 crores. 

get legal advise

Pharmaceutical drugs

  • The Indian Pharma industry is the third-largest in the world by volume. However, India contributes only 3.5% of the total drugs and medicines exported globally. We are also significantly dependent on the import of raw materials and bulk drugs. 
  • The scheme covers Key Starting Materials, Drug Intermediaries, Active Pharma Ingredients etc
  • An incentive between 5-20% is available based on the type of product made and the financial year.     

Telecom and networking products

With increasing internet and mobile penetration in India, the demand for telecom products is only going to increase in the days to come. With this objective, the government has announced benefits worth ₹12000 crores for this sector. The production linked incentives are available for the following types of telecom equipment manufacturing – 

  • Core Transmission Equipment
  • Moreover, 4G/5G, Next Generation Radio Access Network and Wireless Equipment
  • Access & Customer Premises Equipment (CPE), Internet of Things (IoT) Access Devices and Other WirelessEquipment
  • Enterprise equipment: Switches, Router

High-efficiency solar PV Modules

  • India has reached a historic moment recently by cutting cost price of solar energy to ₹2 per unit.
  • With greater manufacturing of solar cells in India, imports can be reduced. This would also economise solar energy further. 
  • The Ministry of New and Renewable Energy would administer the production linked incentives for manufacturing of high-efficiency solar modules, worth ₹4500 crores  

Speciality Steel

  • Speciality steel refers to high-grade steel used by automobiles, electrical steel etc that is used in the manufacturing of transformers, generators. It would also include coated steel, high strength steel, rail steel, alloy bars etc. 
  • The government has allocated a ₹6322 crore for the steel industry through the Ministry of Steel.
  • Additionally, this would enable value addition in steel manufacturing companies and reduce reliance on imports 

Food products

Food products in India have a growing consumer market in India, steady export base and potential for growth. It is also linked to agriculture, and hence is a key focus area worth ₹10,900 crores in incentives offered. The production linked incentives are available for the following segments – 

  • Ready to Eat / Ready to Cook (RTE/ RTC)
  • Marine Products
  • Fruits & Vegetables
  • Honey
  • Desi Ghee
  • Mozzarella Cheese
  • Organic eggs and poultry meat

Automobiles and auto components 

  • The automobile industry is one of the largest contributors to the revenue in India. 
  • Additionally, the Production linked incentives for this sector are worth ₹57,000 crores. 
  • While the scheme has been notified, the final guidelines would be formulated and notified by the Department of Heavy Industries 

Advance Chemistry Cell (ACC) battery

The Advanced Chemistry Cell covers batteries used in consumer electronics, electric vehicles, and renewable energy. Moreover, this would also cover Lithium-ion batteries being key to the upcoming EV market in India. 

With a financial outlay of ₹18,100, the government has planned to incentivise manufacturing of ACC batteries in India. 

White goods such as ACs, LEDs

White goods, which have high consumer demand have a very high potential of domestic value addition. Further, the production linked incentives worth ₹6238 crores would make these products globally competitive.

Textile products and technical textiles

The production linked incentives for textiles would cover man-made fibres and technical textiles. 

Technical textiles are those that aren’t used as garments. This is for non-aesthetic purposes such as furniture, medical use, construction and engineering fibres, agriculture etc. A total of ₹10,600 crores will be as incentives by the Ministry of Textiles.  

Medical devices

  • Incentives will also available for domestic manufacturers of medical devices such as – cancer care, radiotherapy equipment, imaging devices, anaesthetics, catheters, implants etc.  
  • Further, the incentives are available for greenfield investment in plant, machinery and equipment 
  • This incentive would be 5% of sales of eligible products 

 

Production Linked Incentives Announced for 10 Sectors

121
According to the Ministry of Electronics and Information Technology, Samsung, Foxconn Hon Hai, Winstron and Pegatron are among the international manufacturers approved for incentives under the PLI scheme. Domestic players such as Lava and Micromax have also been approved. In the upcoming budget 2021 session, the Government is expected to expand the scheme to more sectors like footwear, chemicals, and agrochemicals.

 

Production Linked Incentives announced for ten business sectors – Here’s how to check if your business benefits

The Union Cabinet has recently approved 10 sectors for such a scheme. These are large to reduce India’s dependence on imports while also enhancing the manufacturing base in India. Further, most of the sectors are labour-intensive and are therefore expected to create greater employment in India. This scheme is approximately going to cost ₹1.45 trillion to the government. In this post, we examine what these sectors are, and the advantages for your business. 

What is a Production linked incentive scheme?

Production linked incentive is an outcome or output-oriented scheme. Here, the incentive b6 the government will pay proportionate to the manufacture of the goods. It is also linked to incremental sales from such products made in India. Therefore, under this scheme, cash incentives would be provided for five to seven years to specified sectors. 

Benefits to a business in availing the Production Linked Incentive scheme  

  • Greater access to financing for research and development in newer areas 
  • Investment for plant, machinery and up-gradation of capital assets 
  • Moreover, reduced dependence on imports 
  • Promotion of domestic manufacturing, and therefore, reduced costs 
  • Promotion of exports 
  • Diversification of goods 

Production linked incentives for electronics manufacturing, technology products and Mobile manufacturing

With an aim to promote large scale electronics, the government would incentivise companies setting up a manufacturing base in India. Companies in the electronics value chain such as mobile phones. electronic components and semiconductor packaging will cover. 

In addition, it also covers the following – 

  • Display Fab
  • Laptop/ Notebooks
  • Servers
  • IoT Devices
  • Specified Computer Hardware

An incentive of 4-6% over the base year of goods manufactured in India for five years would be available

Of all ten sectors, the incentive for the electronics industry is the highest, amounting to ₹41,000 crores. 

get legal advise

Pharmaceutical drugs

  • The Indian Pharma industry is the third-largest in the world by volume. However, India contributes only 3.5% of the total drugs and medicines exported globally. We are also significantly dependent on the import of raw materials and bulk drugs. 
  • The scheme covers Key Starting Materials, Drug Intermediaries, Active Pharma Ingredients etc
  • An incentive between 5-20% is available based on the type of product made and the financial year.     

Telecom and networking products

With increasing internet and mobile penetration in India, the demand for telecom products is only going to increase in the days to come. With this objective, the government has announced benefits worth ₹12000 crores for this sector. The production linked incentives are available for the following types of telecom equipment manufacturing – 

  • Core Transmission Equipment
  • Moreover, 4G/5G, Next Generation Radio Access Network and Wireless Equipment
  • Access & Customer Premises Equipment (CPE), Internet of Things (IoT) Access Devices and Other WirelessEquipment
  • Enterprise equipment: Switches, Router

High-efficiency solar PV Modules

  • India has reached a historic moment recently by cutting cost price of solar energy to ₹2 per unit.
  • With greater manufacturing of solar cells in India, imports can be reduced. This would also economise solar energy further. 
  • The Ministry of New and Renewable Energy would administer the production linked incentives for manufacturing of high-efficiency solar modules, worth ₹4500 crores  

Speciality Steel

  • Speciality steel refers to high-grade steel used by automobiles, electrical steel etc that is used in the manufacturing of transformers, generators. It would also include coated steel, high strength steel, rail steel, alloy bars etc. 
  • The government has allocated a ₹6322 crore for the steel industry through the Ministry of Steel.
  • Additionally, this would enable value addition in steel manufacturing companies and reduce reliance on imports 

Food products

Food products in India have a growing consumer market in India, steady export base and potential for growth. It is also linked to agriculture, and hence is a key focus area worth ₹10,900 crores in incentives offered. The production linked incentives are available for the following segments – 

  • Ready to Eat / Ready to Cook (RTE/ RTC)
  • Marine Products
  • Fruits & Vegetables
  • Honey
  • Desi Ghee
  • Mozzarella Cheese
  • Organic eggs and poultry meat

Automobiles and auto components 

  • The automobile industry is one of the largest contributors to the revenue in India. 
  • Additionally, the Production linked incentives for this sector are worth ₹57,000 crores. 
  • While the scheme has been notified, the final guidelines would be formulated and notified by the Department of Heavy Industries 

Advance Chemistry Cell (ACC) battery

The Advanced Chemistry Cell covers batteries used in consumer electronics, electric vehicles, and renewable energy. Moreover, this would also cover Lithium-ion batteries being key to the upcoming EV market in India. 

With a financial outlay of ₹18,100, the government has planned to incentivise manufacturing of ACC batteries in India. 

White goods such as ACs, LEDs

White goods, which have high consumer demand have a very high potential of domestic value addition. Further, the production linked incentives worth ₹6238 crores would make these products globally competitive.

Textile products and technical textiles

The production linked incentives for textiles would cover man-made fibres and technical textiles. 

Technical textiles are those that aren’t used as garments. This is for non-aesthetic purposes such as furniture, medical use, construction and engineering fibres, agriculture etc. A total of ₹10,600 crores will be as incentives by the Ministry of Textiles.  

Medical devices

  • Incentives will also available for domestic manufacturers of medical devices such as – cancer care, radiotherapy equipment, imaging devices, anaesthetics, catheters, implants etc.  
  • Further, the incentives are available for greenfield investment in plant, machinery and equipment 
  • This incentive would be 5% of sales of eligible products 

 


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Avani Mishra is a graduate in law from the National Law Institute University, Bhopal. She qualified the Company Secretary course with an All India Rank 1 and is a recipient of the President’s Gold Medal for her academic distinctions. She also holds a B.Com degree with a specialization in Corporate Affairs and Administration.