What is PLI scheme? All you need to know about its benefits

The Union government has announced several production-linked incentive (PLI) schemes over the years. Commerce and Industry Minister Piyush Goyal said on Tuesday that the Centre is working to extend incentives under the PLI scheme to more sectors. Furthermore, 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.

With PLI schemes aimed at making the country a manufacturing powerhouse, let’s look at how such schemes work and what their benefits are.

What is a production-linked incentive 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 are its benefits?

A PLI scheme not just aims to boost local production, it can also cut down on import bills. It may also invite foreign investment into the country. Take the aviation sector for instance. The Centre had initiated a production-linked incentive scheme for drones and drone components after it liberalised its rules related to the machine. A scheme like this can also encourage drone manufacturing companies from other nations to invest in India or partner up with domestic companies.

PLI schemes are a cornerstone of the ‘Make in India’ campaign which wants to reduce India’s dependence on exports and transform it into a global manufacturing hub. The schemes can also boost exports and result in a favourable balance of trade with many nations. PLI schemes can also generate employment and enhance India’s manufacturing capabilities.

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