What is a PLI Scheme | The Indian Government approves changes in PLI scheme

• A PLI scheme is a plan introduced by the government, which gives subsidies to companies to manufacture their goods in the country. These schemes are linked to the performance of the organisation. This means that the government provides incentives on incremental sales. This could be in the form of tax rebates or reduction of import duties
• Take the pharmaceutical sector for example. The government aims to boost manufacturing of active pharmaceutical ingredients in the country to make them less dependent on imports from China. To encourage this, the Centre had announced a scheme outlay of Rs 15,000 crore for pharmaceutical manufacturing and another scheme outlay of Rs 6,940 crore for making bulk drugs.

What has happened :

• The government on Wednesday tweaked the Rs 76,000 crore incentive scheme for semiconductors and display manufacturing units, Offering to give 50% of the project cost across all categories of factories as it looks to woo global players such as Intel to set up production base in India to help cut reliance on imports.
• The production linked incentive, or PLI, scheme announced in December last year had offered varying degree of fiscal support to different categories for development of semiconductors and display manufacturing ecosystem in India. These ranged from 30-50 per cent.
• Now, this has been made uniform — the government will fund 50% of the project cost across all technology nodes for setting up of semiconductor fabs, Including not just cutting-edge computing chips but also those used in power, telecom and automotive sectors. You can check about Vedanta’s multi-billion dollar deal with Foxconn to set up semiconductor manufacturing unit in Gujarat.

Why this Change in PLI scheme :

• Minister of State for IT Rajeev Chandrasekhar said the total outlay for the package will remain the same, But harmonisation of incentives to 50% will make the semiconductor policy “extremely competitive” and attract investment across spectrum of opportunities, Namely silicon and compound fabs, packaging units, display fabs, and design and innovation ecosystem.
• Global companies, he said, are examining exploring India as a viable investment destination for semiconductors. India is positioning itself as among the most attractive destination in Asia for “all things electronics and semiconductors”, and The government is “confident” that investments of almost Rs 2 lakh crore will come in over next two years.

High Focus on Chips :

• The Indian semiconductor market was valued at USD 27.2 billion in 2021 and is expected to grow at a healthy CAGR of nearly 19% to reach USD 64 billion in 2026. But none of these chips are manufactured in India so far. Setting up semiconductor units, also known as fabs, is a highly specialised, complex and expensive task. Fabs call for complex technology, are high risk and require long gestation and payback periods, perhaps the reason India failed to crack this space till now.
• The Union Cabinet on September 21 approved the second tranche of the performance-linked incentive (PLI) scheme for the development of solar PV modules, with an outlay of Rs 19,500 crore. The PLI for the “National Programme on High-Efficiency Solar PV Modules” is aimed at achieving a manufacturing capacity of “Giga Watt (GW)-scale in high-efficiency solar PV modules”, Union Minister Anurag Thakur said in a press briefing following the Cabinet meeting.
• The solar PV manufacturers, who will be benefited from the PLI scheme, will be selected through a transparent selection process, the government said. The incentive will be disbursed for five years post commissioning of solar PV manufacturing plants “on sales of high-efficiency solar PV modules from the domestic market will be incentivised”, it added.

Impact:

• The Centre, in an official release, noted that the scheme will bring “direct investment of around Rs 94,000 crore”, And lead to direct employment of about 1,95,000 persons and indirect employment of around 7,80,000.
• It is estimated that about 65,000 MW per annum manufacturing capacity of fully and partially integrated solar PV modules would be installed, the release further noted. The scheme will lead to “import substitution of approximately Rs.1.37 lakh crore”, and also provide an impetus to research and development to achieve higher efficiencies in solar PV Modules, the government added.

In this year’s Budget speech Finance Minister Nirmala Sitharaman had announced an outlay of Rs 1.97 lakh crore for PLI schemes across 14 sectors. These production-linked incentive plans aim to create 60 lakh new jobs over the next five years. They also aim to create an additional production of Rs 30 lakh crore in the same period, as per the government’s website.