Production Linked Incentive (PLI) Scheme

India’s economy significantly depends on the different production-based sectors.To support their development and increase the revenue, the Central Government introduced the PLI scheme.

This scheme aims to offer domestic manufacturers incentives on gradual sales of products.

Keep reading to learn about the scheme's benefits, objectives, and more.

The PLI scheme or Production Linked Incentive scheme was launched in March 2020 to boost the domestic manufacturing sector.As a part of the Make in India initiative, this scheme offers an incentive to eligible firms on incremental sales for five years.

The Government introduced this scheme to reduce India’s dependence on China and other foreign countries.It supports the labour-intensive sectors and aims to increase the employment ratio in India.

This scheme works to reduce down the import bills and boost up domestic production.However, PLI Yojana invites foreign companies to set up their units in India and encourages domestic enterprises to expand their production units.

The IT Ministry has informed the PLI scheme, which would offer 4%-6% incentives to electronics companies that manufacture mobile phones and electronic components.

Now, let's check which sectors fall under this scheme.This will help understand how the scheme works.

The Government has allowed the PLI scheme for 10 sectors, which are as follows -

• Pharmaceutical and medical devices manufacturing
• Mobile and allied equipment
• Automobiles and auto components
• It Hardware and laptop production
• Food processing
• White goods
• Aviation
• Textile and apparel
• Renewable energy
• Metal and mining

Let’s check the objective of this scheme to understand its purpose in detail.

This scheme primarily follows two objectives -

• It aims to make India compliant with World Trade Organisation obligations.
• To make non-discriminatory and neutral following domestic sales and exports.

These objectives target foreign investments in cutting-edge technology and core skill sectors, increase exports, and boost the economic scale.It also aims to make India a part of the international supply chain.

However, interested entrepreneurs have to fulfil specific eligibility parameters to make an application for PLI.

Individuals should know that eligibility parameters may differ in the selected sectors.For instance, the PLI scheme for automobile sector eligibility may slightly vary from the one in the electronics sector.

In this regard, checking the official website would be beneficial. Nevertheless, the general eligibility requirements are as follows.

• The eligibility for telecom units depends on the brink of collective incremental investments and sale of produced goods.
• SMEs and other enterprises must hold 50% of their stock of subsidiaries in the food processing sector.
• In the case of pharmaceuticals manufacturing, a company's net worth should not be below 30% of total investment. This project should fall under the greenfield project.
• For fermentation-based goods, the DVA or Domestic Value Addition needs to be at least 90%.
• DVA of chemical synthesis-based products should be nearly 70%.

Let’s check the benefits Production Linked Incentive scheme sectors can gain.

The following documents have to be submitted by an individual during the online application.

• Company registration certificate
• Memorandum of Association (print copy)
• Applicant’s CIN
• Articles of Association’s copy
• PAN details
• GSTN Certificate xerox
• Company’s profile
• Details of top management profile and   experience
• Authorisation Letter
• Interim annual account for FY 2020-21
• Consortium Agreement (IFA Annexure -5)
• IFA Annexure-4 board resolutionsStatutory auditor authorised net worth certificate
• Construction plan and Pert chart of the project
• Clearances permits, licences and third-party approvals
• Timeline to gain pending clearances
• Annual reports FY 2017-18 to FY 2019-2020
• Employment generation details (semi-skilled, unskilled and skilled)
• Cover letter based on IFA Annexure-1
• IFA Annexure-2 based power of attorney
• Details on benefits as per IFA Annexure-6
• Undertaking for no pending defaults and litigation

Apart from the mentioned documents, an applicant must check the details filled under the electronic form. They have to upload the respective papers-

• PBG documents
• Fulfil the guidelines under AML and FEMA
• Documents related to capital goods import

Failing to provide the mentioned documents can lead to application cancellation by the IREDA.

Individuals should know that managing sustainable development and investments in labour-intensive sectors is demanding for the Government.The extended gestation period makes it quite challenging.

• The PLI scheme depends on total output.This makes it an effective scheme when compared with grants like Mega Food Parks.The easy accessibility adds to the advantage list.
• It supports the anchor investors capable of managing the Greenfield or brownfield projects and other investments.
• This scheme aids beneficiaries in concessions on import and export duty, tax rebates, affordable land acquisition, etc.
• Affordable product pricing is also a benefit of PLI.

Let’s check how to make an application and fill PLI forms.

Individuals should know that different sectors follow a separate application procedure.Here is an example to make an application for the telecom sector.

• Step 1: Visit the official Production Linked Incentive scheme website. 
• Step 2: On the homepage, click on “Register”.
• Step 3: Fill in the Production Linked Incentive Scheme registration form for a large-scale electronics company with details such as PAN, organisation name, address, etc.
• Step 4: Complete your application by clicking on “Register”.

This is some vital information on the PLI scheme and its function. Individuals should keep a tab on the official website to know the details on incentives.

This practice would allow them to know the latest PLI scheme and terms.