Guide to Performance Linked Incentive

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The government of India aims to expand the Performance Linked Incentive (PLI) scheme to 10 more sectors like food processing and textiles other than the already included allied equipment, medical equipment, pharmaceuticals ingredients, mobile phones, etc. The PLI scheme also looks to capture the growing demand in its domestic market along with cutting down on imports.

For boosting domestic manufacturing and cutting down on import bills, the central government introduced a scheme that solely aims at giving companies the incentive on incremental sales from products manufactured in domestic units.

Along with inviting foreign companies to set up shops in India, the PLI scheme also aims to encourage local companies to set up or expand existing manufacturing units.

The incentives of the Performance Linked Incentives include subsidies, monetary benefits, etc.

Importance of the scheme

After the pandemic struck the world and many measures for containing the spread of the virus were implemented, it was very clear that like most countries, India was overly dependent on other countries like China for hardware, medicines and electronic components. India then later implemented the PLI scheme in order to promote indigenous production, reduction in dependence on a single market or geographical region, cut down on imports and make domestic industries competitive on a global scale.

Since manufacturing is a capital-intensive industry with a long gestation period, the incentivising of capital-rich global firms to set up facilities for incremental output makes more sense, according to experts.

Along with this, the scheme will also help in generating numerous job opportunities and help in the growth of India’s GDP.

Sectors having PLI scheme

The first scheme was implemented on April 1, 2020, for the large-scale production of electronic/technology products with a special focus on mobile phones. With a total outlay of Rs 40,995 crore for over five years, which will later be translated to 4-6% of incremental sales that will be generated as a direct result of the PLI as opposed to the normal sales. The PLI expects to boost the production of 100 crore mobile phones worth Rs 14.25 lakh crore by 2025.

Similar Performance linked Incentives were later launched for 13 other sunrise and strategic sectors, like, auto components, drones, chemicals, automobiles, food processing, medical devices, metal and mining, pharmaceuticals, telecom, renewable energy, textile and apparel, consumer durable goods and semiconductors.

Notable companies that have received PLI approvals

In the sector of IT hardware, companies like Winstron, Dell and Foxconn have received PLI approvals. In the telecom sector, Foxconn, Nokia and Dixon are some notable names that have received PLI approvals.

NITI Aayog

India’s apex public policy think tank, National Institution of Transforming India or NITI Aayog, makes recommendations to the union cabinet after detailed deliberations with the ministries or departments of the concerned sectors.

The NITI Aayog is headed by the chairman of the NITI Aayog is Narendra Modi along with Vice-Chairman Dr Rajiv Kumar.

The NITI Aayog is based on the following 7 pillars of effective governance

  1. Pro-people
  2. Pro-activity
  3. Participation
  4. Empowering
  5. Inclusion of all
  6. Equality
  7. Transparency

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