Economics Current

Production Linked Incentives (PLI)

In order to reduce India’s dependence on China, the government in March had announced a scheme that aims to give companies incentives on incremental sales from products manufactured in domestic units. On November 11 the Centre approved the production-linked incentive (PLI) scheme for 10 sectors. These are:
·Pharmaceuticals
·Automobiles and auto components
·Telecom and networking products
·Advanced chemistry cell batteries
·Textile
·Food products
·Solar modules
·White goods
·Specialty steel
·Electronics
 
What is PLI?
PLI Scheme is an outcome-output oriented scheme where incentives will be paid only if the manufacturers make the goods. It proposes to give cash incentives for five to seven years to all the sunrise and important sectors covered in this.
 
Under the scheme:
·Cash subsidies will be provided to companies as a percentage of incremental sales from the base year. 
·The base year is the year when the scheme comes into effect. The percentage of the incentive will depend on the ‘disadvantage’ faced by each sector in domestic manufacturing and will vary from sector to sector. 
·As part of the Rs. 20 lakh crore stimulus announced in May this year to revive the economy and make it more self-reliant, the government rolled out what it described as ‘structural reforms’ in sectors such as coal, minerals, aviation, defence, aerospace, power, and social infrastructure. 
·This included an increase in the foreign direct investment limit in defence production to 74% from 49% disallowing the imports of certain military equipment and weapons systems and privatising power distribution in Union territories. 
·The Centre also announced that it would end its monopoly in coal mining by auctioning 50 blocks, encourage Rs 50,000 crore worth of investment in coal infrastructure, increase viability gap funding in social infrastructure and allow greater private sector participation in the space industry, among other measures.
 
Challenges:
·Progress on the path of self-reliance in most sectors has been slow 
·The electronics sector in India still imports a major chunk of its requirements for smartphone assembly from other countries, especially China.
·This sort of import dependency is not something that a country can reduce overnight.



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