GTRI flags slow PLI incentive disbursement, urges streamlining

New Delhi: In a recent report, the economic think tank GTRI has drawn attention to the sluggish pace of disbursement of production-linked incentive (PLI) schemes in India's manufacturing landscape. With only Rs 4,415 crore disbursed, representing a mere 2.25 per cent of the total Rs 1.97 lakh crore allocated over five years under the PLI schemes announced in 2020, GTRI urges the government to streamline criteria for faster incentive allocation, thereby boosting domestic manufacturing.

GTRI Co-Founder, Ajay Srivastava, noted that the slow fund spend is expected due to the time-consuming nature of establishing greenfield manufacturing operations. However, he emphasized the need for simplified criteria, as current PLI guidelines, involving various thresholds on investments, production, sales, degree of localization, and more, often pose challenges for manufacturers.

The think tank highlighted a case where the government suspected invoice values, leading to the disallowance of incentives, underscoring the subjectivity and delays in claims settlement. Drawing a comparison with the now-abolished MEIS export scheme, Srivastava praised its simplicity, where the Department of Commerce received necessary information from customs and banks, allowing for efficient electronic processing of applications.

GTRI proposes a shift in focus to making specific inputs under the PLI scheme rather than products with numerous manufacturers. It recommends a rate of 4-6% of incremental sales as PLI incentives, potentially boosting profit margins by 30-40%, and providing a significant competitive advantage. The think tank advocates avoiding incentivizing sectors with numerous players, suggesting a focus on cutting-edge product groups where India lacks manufacturing capabilities.

While acknowledging the success of the PLI scheme in the smartphone sector, GTRI warns of potential pitfalls. It notes that the sector's current investment of Rs 7,400 crore has resulted in production valued at Rs 412,000 crore, indicating a concern that PLI incentives might surpass investments by the scheme's end. Srivastava draws parallels with historical events, such as the impact of the introduction of the Goods and Services Tax (GST) in 2017, leading to the disappearance of local smartphone makers, and the rise and fall of firms with changes in MEIS rates in 2018.