India’s ambitious Production-Linked Incentive (PLI) scheme, which has been instrumental in fueling a ₹13 trillion manufacturing boom, is facing a temporary pause on the addition of new sectors. This decision comes in the wake of slowing disbursements under the existing scheme, according to industry sources.
The government had initially considered extending the PLI framework to promising sectors such as toys, drones, and furniture. However, the current focus is on stabilising and optimising the existing scheme to ensure its effectiveness.
The textiles ministry, which had planned to expand the PLI scheme to include product lines like t-shirts and innerwear, has put these plans on hold. Additionally, the PLI scheme for shipping containers has been temporarily suspended due to concerns about the high cost of local manufacturing.
Disbursements under the PLI scheme have slowed down significantly this year, with the total amount disbursed so far being less than ₹1,000 crore. In contrast, nearly ₹10,000 crore was disbursed in the previous fiscal year. This slowdown is attributed to several factors, including manufacturers struggling to meet the stringent production targets required to qualify for incentives.
The textile industry, in particular, faces challenging targets. For instance, apparel manufacturers using man-made fibres must invest a minimum of ₹300 crore and achieve sales of at least ₹600 crores in the current fiscal year to be eligible for incentives. Similar stringent targets apply to other sectors like technical textiles and AC components.
While the PLI scheme has been successful in attracting significant investments and boosting manufacturing, concerns remain about the challenges in meeting the stringent targets and the need for further support to develop the component ecosystem.
The government is now focusing on strengthening and supporting the existing PLI schemes, with potential tweaks to make them more attractive. Sectoral reviews are being conducted to identify areas where investments have been slow and to devise strategies to address these issues.
The PLI scheme, launched in 2021, covers 14 key sectors, including mobile phones, pharmaceuticals, medical devices, automobiles, and electronics. The government aims to leverage the scheme to position India as a global manufacturing hub and create numerous jobs.
While the pause on new sector additions is a temporary measure, the government remains committed to the PLI scheme as a crucial driver of India’s manufacturing growth. By addressing the challenges and optimizing the scheme, the government aims to ensure its long-term success and contribute to the nation’s economic development.
