PRODUCTION LINKED INCENTIVE SCHEME

Introduction

India’s electronics industry has witnessed significant growth in recent years. However, the sector remains heavily reliant on imports, particularly for highend components and finished products.

This dependence exposes India to fluctuations in global prices and hinders its potential to become a major electronics manufacturing hub. To address these challenges, the Government of India launched the Production Linked Incentive (PLI) scheme in March 2020.

The Production Linked Incentive (PLI) Programme was launched in 2020.

It currently covers 13 sectors, including electronics, textiles, food processing, and chemicals.

Objectives of the PLI Scheme for Electronics Manufacturing

The PLI scheme for electronics manufacturing aims to achieve a multipronged approach:

• Reduced Dependence on Imports: By incentivizing domestic production, the scheme aims to significantly decrease India’s reliance on imported electronics, thereby strengthening its economic independence and boosting foreign exchange reserves.
• Enhanced Domestic Value Addition: The PLI scheme encourages companies to manufacture electronics with a higher proportion of domestically produced components. This increases value addition within the Indian economy and promotes the development of a robust domestic electronics ecosystem.
• Integration into Global Supply Chains: A strong domestic electronics manufacturing base is crucial for India’s integration into global supply chains. The PLI scheme aims to make India a competitive player in the international electronics market, attracting foreign investments and collaborations.
• Employment Generation: The growth of the electronics sector under the PLI scheme is expected to create significant job opportunities across various skillsets, from production workers to engineers and researchers.

Target Segments and Incentives Offered

The PLI scheme for electronics manufacturing focuses on two key segments:

1. Mobile Phones: A crucial driver of electronics consumption in India, the scheme incentivizes companies to manufacture both smartphones and feature phones domestically. This segment has witnessed remarkable success, with leading global manufacturers setting up or expanding their production facilities in India.
2. Specified Electronic Components: Recognizing the importance of a robust component ecosystem, the PLI scheme covers a wide range of electronic components critical for domestic manufacturing. These include:
   • Assembly, Testing, Marking and Packaging (ATMP) units: These facilities play a vital role in preparing imported components for final assembly into finished electronic products.
   • Semiconductor Fabrication: Semiconductors are the building blocks of modern electronics. The PLI scheme aims to incentivize investments in domestic semiconductor fabs to reduce dependence on imported chips.
   • Passive Components: Components like resistors, capacitors, and inductors are essential for electronic circuits. The scheme encourages their domestic production to strengthen the supply chain.
   • Printed Circuit Boards (PCBs): PCBs form the foundation of electronic devices. The PLI scheme incentivizes domestic PCB manufacturing to enhance value addition.

The PLI scheme provides a cash incentive based on a percentage of incremental sales (over a base year) of domestically manufactured electronics products. The specific incentive rate varies depending on the target segment, the investment made by the company, and the level of domestic value addition achieved. Generally, the incentive ranges from 4% to 6% over a period of five years.

Eligibility Criteria and Selection Process

Companies engaged in manufacturing the targeted electronics products in India are eligible to apply for the PLI scheme. The selection process is based on a set of criteria, including:

• Minimum Investment: Companies must demonstrate a commitment to establishing or expanding their manufacturing facilities in India by meeting a minimum investment threshold.
• Production Capacity: Applicants need to showcase their ability to achieve a specific level of production capacity within a stipulated timeframe.
• Domestic Value Addition: The PLI scheme prioritizes companies that demonstrate a commitment to increasing the use of domestically produced components in their manufacturing processes.
• Selection Process: A transparent selection process, involving technical evaluation and financial bidding, is conducted to choose eligible companies for the scheme.

Potential Benefits of the PLI Scheme

• Increased Domestic Production: By incentivizing domestic manufacturing, the PLI scheme is expected to significantly boost domestic production of electronics, reducing import dependence and strengthening the Indian economy.
• Job Creation: The growth of the electronics sector under the PLI scheme will lead to the creation of a large number of jobs across various skillsets. This will not only address unemployment but also create a skilled workforce to support the industry’s longterm growth.
• Technological Advancement: The PLI scheme incentivizes investments in cuttingedge technology, fostering innovation and development in the domestic electronics industry. This will enable Indian companies to compete effectively in the global market.
• Export Potential: A robust domestic electronics manufacturing base can make India a competitive exporter in the global market.