Governance Structure: Large-Scale Electronics Manufacturing in India
Electronics manufacturing in India has grown rapidly with a CAGR of around 23% during the last 5 years, with domestic production of electronics hardware touching $76 billion in 2019-20. The electronics manufacturing industry currently provides employment for over 2 million people in India. To further facilitate large-scale manufacturing, development of a supply chain ecosystem, and building of new manufacturing clusters in the country, each electronic manufacturing scheme has been carefully constructed to incentivize the electronics manufacturing industry.
The Production Linked Incentive Scheme (PLI) for Large Scale Electronics Manufacturing proposes a financial incentive to boost domestic manufacturing and attract large investments in the electronics value chain including mobile phones, electronic components and ATMP units. Production Linked Incentives of up to Rs. 40,951 crores will be awarded over a period of 5 years.
This article gives overview of the scheme and information regarding eligibility, application and other details.
The Scheme shall extend an incentive of 4% to 6% on incremental sales (over base year) of goods manufactured in India and covered under target segments, to eligible companies, for a period of five years subsequent to the base year. Financial Year 2019-20 shall be treated as the base year for computation of incremental investment and incremental sales of manufactured goods (as distinct from traded goods).
Tenure of the Scheme
Support under the Scheme shall be provided for a period of five (5) years subsequent to the base year. The Scheme shall be open for applications for a period of 4 months initially which may be extended. The Scheme may also be reopened for applications anytime during its tenure based on response from the industry. For applications received post the initial application period, applicants shall only be eligible for incentives for the remainder of the Scheme’s tenure.
Target Segments
The Scheme shall only be applicable for target segments namely mobile phones and specified electronic component.
After the success of the First Round of Production Linked Incentive Scheme in attracting investments in mobile phone and electronic component manufacturing, the proposal for accepting applications under Second Round of the PLI Scheme has been approved by the Competent Authority. The target segment for the purpose of this round shall be Specified Electronic Components.
Under the Second Round, incentives of 5% to 3% shall be extended on incremental sales (over base year i.e. 2019-20) of goods manufactured in India and covered under the target segment, to eligible companies, for a period of four years. The Application Window shall be open until March 31st, 2021 initially and may be extended and / or reopened based on response from the industry. Incentives under the Second Round of PLI Scheme shall be applicable from April 1st, 2021.
Eligibility Criteria
Support under the Scheme shall be provided only to companies engaged in manufacturing of target segments in India. This shall include contract manufacturers as defined in the FDI Policy Circular of 2017.
- Each application shall be limited to one (1) of the target segments.
- Eligibility shall be subject to thresholds of incremental investment and incremental sales of manufactured goods (as distinct from traded goods). An applicant must meet all the threshold conditions to be eligible for disbursement of incentive. Eligibility threshold criteria are detailed in below.
Incentive Outlay
- Total Incentive: The expected annual incentive outlay and cumulative incentive outlay under the Scheme is as follows:
- Incentive Per Company: The incentive per company will be applicable on incremental sales of manufactured goods (as distinct from traded goods) over base year subject to ceilings as decided by the Empowered Committee.
Basis of Computation
- Assessment of incremental investment and sales of manufactured goods shall be based on details furnished to the Departments / Ministries / Agencies and Statutory Auditor certificates.
- Functional Guidelines will be issued by MeitY in consultation with concerned Departments / Ministries.
Process Flow
STEP ONE- APPLICATION PROCESS
- Submission of Application – Applicant
- Prima Facie Examination – Project Management Agency (PMA)
- Letter of Acknowledgement issued – PMA (Letter of Acknowledgement to be issued within 15 working days post completion of examination)
- Application Appraisal – PMA
- Application Approval (based on decision of Empowered Committee and Competent Authority) – PMA (Letter of Approval to be issued within 5 working days of approval from Competent Authority)
STEP TWO- BASELINE DETERMINATION PROCESS
- Submission of Documents to PMA – Applicant
- Determination of Baseline (within 30 working days from submission) – PMA
STEP THREE- DISBURSEMENT PROCESS
- Submission of Claim for Disbursement of Incentive – Applicant
- Verification of Eligibility and Assessment of Incentive – PMA
- Approval of Disbursement Claim (based on decision of Empowered Committee and Competent Authority) – PMA
- Disbursement of Funds – PMA
Approval and Disbursement Process
- Application under the Scheme can be made by any company registered in India.
- An initial application, complete in all aspects, will have to be submitted before the due date. Acknowledgement will be issued after initial scrutiny of the application. The acknowledgement shall not be construed as approval under PLI Scheme.
- Eligible applications will be appraised on an ongoing basis and considered for approval.
- Incentive shall be released to eligible applicants, meeting the required thresholds and whose disbursement claims are found to be in order.
- Incentives under the Scheme will be applicable from 01.08.2020.
Nodal Agency
The Scheme shall be implemented through a Nodal Agency. Such Nodal Agency shall act as a Project Management Agency (PMA) and be responsible for providing secretarial, managerial and implementation support and carrying out other responsibilities as assigned by MeitY from time to time. Detailed constitution, functioning and responsibilities of the PMA will be elaborated in the Scheme Guidelines.
For carrying out activities related to the implementation of PLI Scheme, PMA would inter-alia be responsible for:
- Appraisal of applications and verification of eligibility for support under the Scheme
- Examination of claims eligible for disbursement of incentive under the Scheme
- Compilation of data regarding progress and performance of the Scheme including Incremental Investment and Incremental Sales of Manufactured goods for companies under the Scheme.
Empowered Committee (EC)
- An Empowered Committee (EC) including CEO NITI Aayog, Secretary Economic Affairs, Secretary Expenditure, Secretary MeitY, Secretary Revenue, Secretary DPIIT and DGFT will be formed.
- The EC will consider applications, as found eligible by the Project Management Agency under the Scheme, for approval.
- The EC will consider claims, as examined and recommended by the Project Management Agency, for disbursement as per the laid down procedure.
- The EC will conduct a periodic review of eligible companies with respect to their investments, employment generation, production and value addition under the Scheme.
- The EC may revise incentive rates, ceilings, target segments and eligibility criteria as deemed appropriate during the tenure of the Scheme.
- The EC will also be authorized to carry out any amendments in the Scheme Guidelines.
- Detailed constitution, functioning and responsibilities of the EC will be elaborated in the Scheme Guidelines.
Vaibhavi Pingale
Ms. Vaibhavi Pingale is a Visiting Faculty of Economics at Gokhale Institute of Politics and Economics, Pune & at Savitribai Phule Pune University. She is pursuing her PhD. She has been actively writing media articles other than academic research.
