PLI Scheme’s Success Indicates Government is On Track to Enhance India’s Manufacturing Capex

Article By : ICRA

India's Production-Linked Incentives scheme seems on track to revive the country's manufacturing capex.

The Production-Linked Incentives (PLI) scheme seems on track to revive India’s manufacturing capex. This, according to ICRA’s recent report on the success of the scheme across sectors.

The Government extended applications to the second round on the encouraging response for a few sectors and has increased (or planning to increase) PLI outlay for some others.

“The success of the PLI scheme indicates the government is on track to enhance India’s manufacturing capex. We see a high probability of the outlay for certain sectors, especially with green initiatives, being expanded. However, in the wake of rising input costs, and government’s anti-inflationary measures, execution delays in certain sectors could be a concern,” said Rohit Ahuja, Head of Research and Outreach at ICRA.

Green initiatives like renewables and ACC batteries witnessed a good response. In renewables, the Government had raised the outlay for solar PV modules to Rs240 billion in the FY23 budget, after seeing an encouraging response in the first round for the Rs45 billion scheme. Analyzing the details of the waitlist from the first round of bidding, it seems the entire Rs240 billion PLI outlay would be well covered.

A similar response was visible in the ACC batteries PLI scheme, where the applications were received for ~110GWh against the 50GWh PLI scheme. The Government may look at increasing the PLI outlay for this sector, on similar lines as for the solar PV modules PLI, considering the massive interest. The largest PLI scheme, for semiconductors, has received applications for 80% of the outlay in Round 1, despite an aggressive timeline for submissions.

Several other sectors, such as pharma, auto, food products, etc. have received positive responses. For a few sectors like AC/LED, the Government opened the PLI applications after receiving requests from several entities. Sunrise sectors like drone manufacturing received an encouraging response and attracted enough applications over the 20 days period.

The application submission for the Steel sector PLI, was open until May 31, 2022. Like other PLI schemes, the steel PLI, too, has been well received by the industry. However, there are requests for modifications to the scheme which the Government is working on and has extended the application submission timeline.

“The Government’s focus on climate goals is visible from the PLI schemes in ACC battery and solar PV modules. The Government’s plans to consider a PLI in electrolyzer manufacturing could be an important step towards accelerating green hydrogen production in India,” concluded Ahuja.

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