In a major push to domestic manufacturing in the country, the government proposes to pump in over Rs 3 lakh crore through an umbrella production linked incentive (PLI) scheme that will run simultaneously in 10 identified sectors for a period of five years.
Sources privy to the development said that the Niti Aayog has been entrusted with the task to finalise a cabinet note proposing extension of the PLI scheme with separate budgetary allocation for each identified sector for the next five years starting FY22.
The allocation will have to be worked out within the confines of the suggestions given by the expenditure department based on expected savings from the withdrawal of the existing Merchandise Exports India Scheme (MEIS) introduced in April 2015 to promote manufacturing and exports of specified goods from India.
“A plan for a mega Rs 3 lakh crore PLI scheme has been finalised by an empowered group of secretaries chaired by the cabinet secretary early this month. The allocation under the expanded PLI has been worked out on the basis of savings made by withdrawal of the MEIS scheme and liabilities on account of the new export incentive scheme, Remission of Duties or Taxes on Export Products (RoDTEP). This will ensure that there is no imbalance on account of introduction of PLI,” said the source quoted above.
Under the proposed PLI scheme, the government will incentivise domestic production in 10 areas to begin with. These include battery storage, solar PV modules, electronics (laptop, server, IoT devices, specified computer hardware), automobile and auto components, telecom and networking products, textiles, food processing, speciality steel and white goods (air conditioners and LED).
Apart from these, large scale electronic manufacturing (mobile phones), pharmaceutical drugs and medical devices, which already have an approved PLI scheme, would be provided full budgetary allocation for next five years.
In the discussions by the EGoS, the highest allocation of close to Rs 60,000 crore (over the next five years) has been proposed for automobile and auto component sectors. This is with the belief that this sector could help India become a global hub of manufacturing and source house for global industries.
The next highest allocation has been proposed for large scale electronic manufacturing at Rs 40,000 crore, where the mobile phone manufacturing sector is already getting a PLI.
The PLI for pharma sector has also been proposed for a higher allocation of Rs 30,000 crore to give a boost to production of API that is largely imported at present.
The electrification of transport has also been identified as an important area and has been considered for a budgetary allocation of over Rs 18,000 crore.
The next highest allocation has been suggested for telecom and networking products, textiles, and food processing at over Rs 10,000-15,000 crore each.
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Sources said that the cabinet note will also contain information of other pillars of government strategy to boost domestic manufacturing, including the phased manufacturing programme (PMP). This incentive is being worked out for five areas, including furniture and bedding; plastics; optical, photographic surgical instruments; toys, games, sports equipment; low value electrical machine parts and consumer durables.