The Centre must assess the performance of the initial set of PLI beneficiaries before expanding the list
The government is promoting Production Linked Incentives (PLIs) in a big way to meet multiple policy objectives such as increasing export competitiveness, plugging local industry into the global supply chain and encouraging import substitution. The Prime Minister has expressed the hope that the scheme would contribute $520 billion in incremental output in five years. Having drawn greenfield investments into electronics last year, the Centre appears keen to extend PLI schemes to ten new sectors. The PLI route is clearly superior to income tax holidays or investment allowances that were in vogue earlier. The turnover-linked subsidy of 4-6 per cent is restricted to a chosen few manufacturers in defined product segments who commit to meeting specific capital, turnover and value-added targets. But the Centre must iron out teething troubles and evaluate promises-versus-performance for the first set of PLI recipients in sectors such as electronics, mobile phones and bulk drugs, before extending it to other sectors. With an outlay of ₹1.97 lakh crore, the Centre is after all introducing a new category of subsidy into the Budget. It must also be circumspect about various interest groups keen to benefit from the subsidy.
Earlier experiences with regulated-return projects in fertilisers and power also suggest that firms may not be above gold-plating their project costs or over-promising on delivery to gain incentives. Ministries must be vigilant on these aspects. Overall, the objective of the PLI scheme should be to ensure that India is home to globally competitive players who can be self-sustaining, once the crutches of government support are removed.