Analysis: Production Linked Incentive Scheme of MIETY

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The Ministry of Electronics and Information Technology (MeitY), previously known as the ‘Department of Information Technology’ was earlier a part of the Ministry of Communications and Information Technology. It became an independent body of the Union Government in 2016. Its duties mainly involve matters in IT policy making and development of the electronics industry. The MeitY was working to launch schemes in order to fuel those electronic based companies which will make India a global exporter of electronics goods in the coming future. The production of mobile handsets increased massively over the course of a few years due to the continuous growth of technology, this resulted in the high number of exports. India produced 1.3% of the global share in production of electronics in 2012, which went up to 3% in 2018 in the matter of just 6 years.

The Production Linked Incentive Scheme (PLI) is among the three incentive schemes recently announced by the government to spur the electronics industry. Out of the Rs. 48,000 crores budget of the three schemes, the PLI is notified to have the maximum budget worth Rs. 40,000 crores.

Significance of the Scheme

The government launched the PLI scheme chiefly to act as a push for domestic manufacturing of mobile phones and specified electronic components such as Printed Circuit Boards (PCB), photopolymer films and Assembly, Testing, Marking and Packaging (ATMP) units. It mainly focuses on large scale manufacture. It is also so important because, it will further attract more investment increasing export and hence is a plan for the future.

Salient features

Ravi Shankar Prasad, the Union Minister announced the guidelines of the three schemes released by the government aiming to boost the electronics sector in India. It focusses to attract top five global and five domestic companies in India to be chosen after a screening process.

The target segment includes mobile phones and specified electronic components like SMT Components, Discrete semiconductor devices, Passive components, Printed Circuit Boards (PCB), Sensors, transducers, actuators, crystals, System in package, Micro/Nano-electronic components and Assembly, Testing, Marking and Packaging (ATMP) units.

According to the PLI scheme, an incentive is given on mobile phones and other electronic components as a manufacturing push. The scheme will start its applicability from the 1st of April 2020 for an initial period of four months. However, the tenure extends for 5 years subsequent to the base year (the base year being 2019-20). Under the scheme, the companies shall be applicable to benefits from 1st August, 2020.

Incentive of 6%, 5% and 4% in the first two years, the next two years and the fifth year respectively will be given to all companies eligible under the scheme registered in India.  

Where the company is required to manufacture phones worth Rs. 15,000 and above and make an investment of Rs. 1000 crores over the course of four years with an investment of Rs. 250 crores in the first year alone. The incremental sale over the five years being Rs. 25,000 crores.

However, in case of a domestic company, the minimum investment to be made is only Rs. 200 crores over the four years with Rs. 50 crores in the first year. The incremental sale over the five years being Rs. 5000 crores.

For other specified Electronic components, the minimum investment over the four years is required to be Rs. 100 crores with the incremental sale being Rs. 600 crores.

Objectives of the Scheme

  • The main objective behind the launch of the PLI Scheme is to spur the local handset production in the electronics industry of India as a part of the ‘Atma Nirbhar’ principle emphasized by Prime Minister Narendra Modi, making India a world class exporter of electronics goods.
  • This scheme, by and large, is expected to increase foreign investments and hence make India a self-sufficient nation. It seeks to be a plan for the future strengthening electronics sector of India and creating new job opportunities. The scheme, therefore, aims at India’s growth and development and make India a leader in the global market.

Legal aspect

A Nodal Agency shall be responsible for the execution of the scheme and hence act as a Project Management Agency (PMA) in disguise. It is required to receive its first application before 31st July 2020. All duties prescribed by the MeitY shall be duly performed by the agency which includes any managerial or implementation work like assessment of applications, authentication of claims of eligibility and verification, from time to time, of the performance of the company.

The new scheme requires a strong supervision for its governance; hence, an Empowered Committee is intended to be created consisting of CEO NITI Aayog, Secretary Economic Affairs, Secretary Expenditure, Secretary MeitY, Secretary Revenue, Secretary DPIIT and DGFT. Further, the Empowered Committee is responsible to review new eligible applications under the Nodal agency for approval and also oversee the periodic review of the companies on matters involving investment, generation of employment, production and value addition under the Scheme. Its other duties include revision of incentive rates, target segments and any change to be brought in the eligibility criteria of the scheme.

Critical Analysis

The idea of the PLI Scheme was welcomed with open arms by the Manufacturers Association for Information Technology, popularly known as MAIT. The President-MAIT talked positively of the scheme and also suggested that this scheme be extended to other electronics. In this crucial time when the country in under lockdown and the industry is facing a standstill, this step can act as a boon shooting the electronics industry in India to great heights.

Conclusion

The PLI Scheme is considered a necessary encouragement to spur the electronics industry in India and in making India a global manufacturer and exporter in electronics. As per the reports, the Covid-19 lockdown in China has led to discrepancies in supply of electronics goods. India is perceived to be an alternative for companies to invest due to India’s large market. This is seen as an opportunity by the Union government. Hence, the scheme brings with itself many responsibilities and expectations.

Author: Deepak Purohit from Sangam University.

Editor: Silky Mittal, Junior Editor, Lexlife India

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