Production Linked Incentive Scheme

Source: The Hindu

Syllabus: Gs3: Changes in Industrial Policy and their Effects on Industrial Growth

Context: The Ministry of Electronics and Information Technology (MeitY) has introduced a Production Linked Incentive Scheme for Large Scale Electronics Manufacturing.

What is Production Linked Incentive Scheme?

  • Aim is to position India as a global hub for electronics system design and manufacturing.
  • It provides an incentive of 4-6 per cent on incremental sales of mobile phones and specified electronic components manufactured in India, to eligible companies, for a period of five years.
  • Eligible companies are (a) mobile phones manufactured and sold by domestic companies, (b) mobile phones manufactured and sold by other companies (invoice value of ₹15,000 and above) and (c) specified electronic components.
  • The scheme is available to all companies registered in India which meet the threshold requirement of a specified incremental investment between ₹100 crore and ₹1,000 crore in the next four years as well as incremental sales of manufactured goods.
  • Accordingly, the scheme is designed to select only the few top companies. A maximum of five domestic and five global mobile manufacturing companies and 10 electronic component manufacturers will be selected.
  • The scheme also provides for the constitution of Empowered Committee (EC) which has the power to review and revise rate of incentives, ceilings, eligibility criteria, etc.
  • Unlike export linked subsidy schemes such as MEIS, EPCG, and SEZ, the present scheme is investment and production linked and may not violate international trade agreements.

What are the concerns associated with the scheme?

  • The scheme offers higher incentives for higher production rate. However, the incentives cannot be claimed beyond the financial outlay proposed by the Government, which is ₹40,951 crore.
  • In case of incentives exceeding the annual financial outlay, the incentives will be disbursed to all companies on the basis of their net incremental sales. This implies that an over-performing company may not be reap the benefits under the scheme in absolute terms.

What is the way forward?

  • The Government should also look to implement similar incentive schemes for other sectors such as automobile, pharmaceuticals, FMCG, etc.
  • Further, the government must also focus on service industry which has rarely got any incentive from the Government.
    The   Production Linked Incentive Scheme has all the necessities required to increase investments, employment generation, domestic value addition, capacity building and innovation to make India ‘Atmanirbhar’ as far as mobile phone manufacturing is concerned.
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