PLI SCHEME

Description

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Context

The government approved applications by 75 automobile companies, under the ‘Component Champion Incentive Scheme’, which is part of the Production Linked Incentive (PLI) scheme for the automobile industry.

What is the PLI Scheme?

PLI scheme is an initiative that provides incentives to domestic industries to boost local production.
Through this scheme the Government aims to give companies incentives on incremental sales from products manufactured in domestic units.
PLI has been introduced to boost domestic manufacturing and cut down on import bills.

What is Incremental Sale?

Based on past performance and the projection for future, companies set ‘sales targets’. And then employees are encouraged to make even more than that and whatever has been achieved in excess is called as incremental. So, basically Incremental sales are a concept wherein a company manages to sell more products as compared to its estimates. But to ramp up production in order to sell more products companies usually need to go for self- funding.

In the PLI Scheme however, the Government will provide subsidies/ incentives on this “Incremental Sale” of goods manufactured in domestic units i.e within India.

Objectives of the Scheme

To encourage foreign companies to set up their production activities in India. When this happens, we could see more foreign investments coming into our country.
To provide support towards the existing domestic companies to expand their manufacturing units.
To ensure that more employment opportunities are provided to Indian citizens in the manufacturing sector.

Sectors under PLI Scheme

2020

2021

Drones and Drone Components: Ministry of Civil Aviation

PLI Scheme for the automobile sector

The PLI Scheme for the automobile and auto components industry has two components – the Champion OEM incentive scheme and the Component Champion incentive scheme.
The ‘Champion OEM’ incentive scheme is a ‘sales value linked’ scheme applicable on Battery Electric Vehicles and Hydrogen Fuel Cell Vehicles of all segments.
The ‘Component Champion’ incentive scheme is a ‘sales value linked’ scheme applicable on Advanced Automotive Technology components of vehicles, completely knocked down / semi knocked down kits, vehicle aggregates of 2-wheelers, 3-wheelers, passenger vehicles, commercial vehicles and tractors.

Potential of PLI Scheme

Boost to manufacturing Sector

A strong, vigorous and dynamic manufacturing sector will fuel India’s economic growth by allowing companies producing in India to penetrate effectively into the global supply chains across various sectors.

Reduce imports

Apart from enhancing exports, it will also reduce our import dependencies and spur domestic consumption.

Self Reliance

The call for ‘Atmanirbhar Bharat’ has once again brought manufacturing to the centre stage.
It has its significance in driving India’s growth and creating jobs in the country at a large scale.
India offers an attractive domestic market, with a large population in the educated and earning segment.
It also has a strong institutional framework which allows for a smooth functioning of the industry.

Integration with global market

A concerted effort towards attracting substantial investments for the creation of large manufacturing facilities, combined with a sharp focus on efficiency and economies of scale, can help Indian companies and manufacturers become globally competitive and integrate with the global markets.

Spillovers

The scheme will also have beneficial spillover effects by the creation of a widespread supplier base for the anchor units established under the scheme.
A limited number of eligible anchor entities in each of the selected sectors will invest in technology, plant & machinery, as well as in R&D.
Along with the anchor unit, these supplier units will also help to generate massive primary and secondary employment opportunities.

Boost to exports

The current basket of Indian manufacturing constitutes of large volume of low-value products.
The scheme aims to correct this by encouraging large manufacturers to bring technology and to build capabilities for high value output thereby providing higher returns to the upstream producers.
It will also enable increase in exports.

Strategic importance

The scheme envisages a globally-integrated manufacturing in sectors such as automobile and auto components, pharmaceuticals, telecommunications, white goods and steel.
These are crucial sectors in terms of their strategic importance, contribution to the GDP and employment-generation potential.
PIL will encourage domestic manufacturers to seize the emerging international opportunities, given the changing geo-political orientation of the world.

https://www.thehindu.com/business/Industry/govt-approves-application-of-75-auto-component-firms-under-pli/article65228190.ece