India likely to review eligibility criteria and investment targets of PLI schemes

The government will soon conduct a review of production-linked incentives (PLI) schemes, sources told CNBC-TV18 on March 17. They said the government wants to review the eligibility criteria under a few of the PLI schemes to see if the terms are constraining investments.

Sources have said a review of 14 PLI schemes is underway across ministries and that the government is considering whether the investment targets mentioned in some PLI schemes are realistic.

The government is assessing whether the price caps in some PLI schemes are a hurdle to manufacturing growth and whether eligibility criteria should only have an incentive cap and not a price​ cap. Officials are assessing how original equipment manufacturers (OEMs) are making future investments in the PLI-targeted sectors without claiming incentives.

It must be noted that PLI incentives on mobile phones are for products costing Rs 15000 and above, and for e-scooters, they are for products costing up to Rs 1,50,000. The PLI scheme for automobiles is for OEMs with existing investments of Rs 3,000 crore and the scheme requires Rs 2,000 crore of investments over five years.

Pankaj Mohindroo, Chairman of the Indian Cellular and Electronics Association (ICEA), spoke to CNBC-TV18 about the progress of the 14 PLI schemes currently under review. He noted that India is aiming to capture a part of the value chain, and there is a need for global firms to come to India to achieve this.

The PLI schemes have been touted as a targeted approach, with a frugal scheme for optimizing outcomes.

Mohindroo added, “The PLI scheme for mobile phones is extremely successful and nobody has been feeling deprived or has been left out of the scheme. I would say, efficacy is 90 percent plus.”

Speaking to CNBC-TV18, Sagar Shah, Partner- Indirect Tax, EY India mentioned that some PLIs have a gap in terms of investment, which could be a barrier for startups and mid-sized firms. He suggested that allowing more time under the PLI could be a solution to this issue, as there is demand from the industry for such a move.

Shah said, “If you see especially some of the PLI like the auto PLI and clearly there is a gap when it comes to the investments, especially for OEMs where the limits are very large. While some of the large players will be able to do it, but the startups and the midst market is going to be clearly hit and that is where the challenge is to say that the investment limit is very high.”