Latest in Government Schemes

  • MSME ministry announces new guidelines for Pottery & Beekeeping schemes

    MSME ministry announces new guidelines for Pottery & Beekeeping schemes

    Ministry of Micro, Small and Medium Enterprises (MSMEs) on Thursday announced new guidelines for schemes such as Pottery and Beekeeping activity under which it expanded and doubled the support for these two activities. ''A few days ago, the Ministry of Micro Small and Medium Enterprises (MSME), had announced expanding and doubling the support to Artisans who might be interested in making Agarbatti.  

    Taking these efforts further, the Ministry has now come out with new guidelines for two more schemes which include ‘Pottery Activity’ and ‘Beekeeping Activity','' an official statement said. It further said that these new initiatives of the Ministry with beneficiary-oriented Self-Employment schemes, are aimed at rejuvenating the grass root economy contributing to AtmaNirbhar Bharat Abhiyan. 

    ''For ‘Pottery Activity’ the government will provide assistance with pottery wheel, Clay Blunger, Granulator etc. It will also provide Wheel Pottery Training for traditional pottery artisans and Press Pottery training for pottery as well as non-pottery artisans in Self Help Groups,'' it said. Under the new guidelines there is also a provision to provide a Jigger-Jolly training programme for pottery as well as non-pottery artisan in Self Help Groups.  

    With the new guidelines the Ministry aims to enhance the production, technical knowhow of pottery artisans and to develop new products at reduced costs; to enhance the income of pottery artisans through training and modern and automated equipment; to provide skill-development to SHGs of pottery-artisans on focused and decorative products, with new pottery designs; to encourage the successful traditional potter to set up unit under PMEGP scheme; to develop necessary market linkages by tying up with exports and large buying houses; to innovate new products and raw materials to make international scale pottery in the country; Preparing them to graduate from pottery to crockery and Trainer's training programme for skilled pottery artisans who want to work as Master Trainers. ''A total of 6075 Traditional and others (non-traditional) pottery artisans, rural unemployed youth and migrant labourers will benefit from this scheme,'' the statement added.  

    It also said that an amount of Rs 19.50 crore will be expended to support 6075 artisans with a Centre of Excellence, with MGIRI, Wardha, CGCRI, Khurja, VNIT, Nagpur and suitable IIT, NID and NIFT etc, for product development, advance skill programme, and quality standardization of products.

  • The Khadi and Village Industries Commission will give employment to nearly 1,500 persons

    The Khadi and Village Industries Commission (KVIC) has extended the benefits of various employment generation schemes to nearly 1,500 persons in 10 cities to celebrate ''Sewa Diwas'', which marks the birthday of Prime Minister Narendra Modi.

    From Arunachal Pradesh on the North Eastern Frontier to Bikaner on the Western Border and from Chandigarh and New Delhi in the North to Madurai and Coimbatore down South, KVIC on Thursday organized 14 programs to expand the ambit of its welfare projects to create local employment. 

    Minister of State for MSME, Pratap Chandra Sarangi inaugurated a SFURTI Cluster of 500 artisans for making hand-knotted carpets in Prayagraj in Uttar Pradesh. Sarangi lauded the initiatives of KVIC for empowering artisans and said this would help realize the dream of resurgent India. 

    ''Khadi is playing a big role in making India “Aatmanirbhar”, he added. 

    KVIC Chairman Vinai Kumar Saxena launched six different programs in Varanasi, the Parliamentary constituency of the Minister, that include the first Footwear Training cum Production Center in Varanasi for leather artisans (Mochi) in collaboration with Central Footwear Training Institute (CFTI), Agra. He also distributed 6 innovative cycle-mounted Tea/Coffee Selling units under Project DigniTEA that will enable tea-sellers to earn a respectable livelihood while selling tea/coffee hygienically. 

    He distributed electric pottery wheels to 300 Kumhar families under Kumhar Sashaktikaran Yojana and 200 bee boxes to 20 farmers' families under Honey Mission. Later, he also distributed 6 hand-operated Agarbatti making machines at Sewapuri Block in Varanasi under the Khadi Agarbatti Aatmanirbhar Mission while also launching the plantation of 100 saplings of Bambusa Tulda, a bamboo species used for making Agarbatti sticks. This will lead to the local availability of raw material for Agarbatti. 

    Notably, Sewapuri has been identified as one of the “Inspirational Districts” by Niti Aayog and several projects have already been launched at Sewpuri to provide employment to migrant workers. 

    In the scenic village of Chullyu in Arunachal Pradesh, Saxena inaugurated the state's first Silk Training cum Production Centre that will create local employment to artisans and increase the production of local Silk. KVIC has renovated a dilapidated government school building to develop the Silk Training cum Production Centre. Locals said no such job-oriented activity had taken place in Arunachal Pradesh in the last 50 years. 

    KVIC Chairman said sustainable development through local employment generation has been the key focus of KVIC which is aligned with the Prime Minister’s commitment of “Job to Every Hand” (Har Hath Me Kaam). 

    “It is the inspiration and appeal of the Prime Minister that has taken Khadi to a new height. We are hopeful that he will continue to lead Khadi as its biggest brand ambassador,” Saxena said. 

    He also distributed 6 cycle-mounted Tea and Coffee selling units to local unemployed youths each in New Delhi, Jaipur and Chandigarh. 

    Seeking to empower local artisans, KVIC Chairman distributed New Model Charkha in Rajasthan’s Bikaner district and Kovilpatti in Madurai district in Tamil Nadu. Similarly, to provide Khadi artisans with better marketing opportunities, KVIC inaugurated two Khadi sales outlets in Barkhedi in Bhopal and Coimbatore in Tamil Nadu respectively.

  • Union Minister MSME, Mr. Gadkari seeks investment for MSMEs from Int'l bodies

    Union Minister of Micro, Small, and Medium Enterprises (MSME) Nitin Gadkari has sought investment by international institutions and bodies in the MSME sectors.

    According to a statement, he said this while addressing the Indo-Australian Chamber of Commerce and Women Innovator on Trade Investment and collaborations in road infrastructure and MSMEs on Wednesday. 

    The minister further said that the government is concentrating on village, agricultural and tribal sectors for providing employment opportunities there. 

    "It is the MSME sector which will drive the Indian economy in the coming years,'' he emphasized. 

    He also said that investment in infra and insurance sectors has been opened up, as there are huge opportunities in insurance, pension and share economies.

  • Summary of the Announcements made by the Government for the MSME Sector On 13th May, 2020

    Summary of the Announcements made by the Government for the MSME Sector On 13th May, 2020

    Specific to MSME Sector 

    Post1 

    Government of India announces Collateral Free Automatic Loans worth Rs.3 lakh crores for MSMEs, with. 

    100% Credit Guarantee 

    12 month moratorium on payment of principal 

    No Guarantee Fee & Collaterals 

    Tenor– 4 years 

    To benefit 45 lakh MSME Units 

    Post2 

    Udyam se Udyog ka Naya Bharat! Government to support Stressed MSMEs with infusion of Rs.20,000 crore equity support through Subordinate Debt 

    Stressed MSMEs or MSMEs with NPA loans will be eligible 

    More than 2 lakh MSMEs likely to be benefitted 

    Government to infuse Rs.4000 crore in Credit Guarantee Trust Fund for MSEs 

    Post3 

    Big boost for the MSME Sector!Fund of Funds created to infuse equity worth Rs.50,000 crore in the MSME Sector 

    A Rs.10,000 crore Corpus Fund created. 

    To help potential MSMEs in expansion 

    Post4 

    Growth beyond leaps and bounds with new defined MSMEs- Distinction between manufacturing and services MSMEs removed. Investment limits revised upwardly. 

    Criterion of turnover added. 

    Breaking the shackles of old definition, MSMEs to grow leaps and bounds 

    Micro enterprises – investment upto Rs.1crore and turnover upto Rs.5 crore 

    Small enterprises – investment upto Rs.10 crore and turnover upto Rs.50 crore 

    Medium enterprises – investment upto Rs.20 crore and turnover upto Rs.100 crore 

    Post5 

    Local hoga Global! In a major initiative, Global tenders to be disallowed for Government tenders upto Rs.200 crore to enable MSMEs to participate in the Government procurement process. 

    Post6 

    Government of India and CPSEs to clear all receivables of MSMEs in the next 45 days 

    Post7 

    E-market linkages for MSMEs across the board to provide marketing opportunities.  


    Social Media Posts relating to other Announcements having positive impact on MSMEs. 

    Post1 

    Rs.2,500 crores EPF support for businesses and workersfor three more months August, 2020. This will benefit more than 3.5 lakh units and 72 lakh employees. 

    Post2 

    Special Liquidity Scheme for Non-Banking Financial Companies, Micro-Finance Institutions, Housing Finance Companies worth Rs.30,000 crore. 

    Post3 

    To cater to liquidity needs of MSMEs, Partial Credit Guarantee Scheme 2.0 for NBFCs worth Rs.45000 crore introduced. Government of India to bear the first 20% of loss. 

    Post4 

    Major Relief to Contractors 

    All Central Agencies like Railways, Ministry of Road Transport& Highways, Central Public Works Dept, etc. to grant extensions of contracts up to 6 months without costs to contractor. 

    Post5 

    Expediting refunds to partnerships, proprietorship & LLPs will help the MSMEs 

  • Lok Sabha passes bills to free-up farmers to sell their produce anywhere

    New Delhi, 18 Sept

    The Lok Sabha passed two bills that would allow farmers for direct marketing their produce and to get better prices. 

    Union Minister of Agriculture & Farmers’ Welfare, Rural Development & Panchayati Raj, Shri Narendra Singh Tomar introduced The Farmers' Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020 and The Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Bill, 2020 in Lok Sabha. The bills will replace ordinances promulgated in June 2020. 

    The government is confident that the new laws will boost farm incomes although some farm leaders fear that farmers may be exposed to manipulation by traders and companies. 

    Replying to the discussion Shri Narendra Singh Tomar said that farmers will now be freed from the restrictions of having to sell their produce at designated places only, the procurement at Minimum Support Price will continue and mandis established under State laws will also continue to operate. 

    The Union Agriculture Minister said that these legislations will bring about revolutionary transformation and transparency in the agriculture sector, electronic trading will increase, there will be accelerated agricultural growth as private investment will be attracted in building supply chains and agricultural infrastructure, new employment opportunities will be created and rural economy will get a boost, which will in turn help to strengthen the national economy. 

    The legislation related to price assurance will create an ecosystem where the farmers and traders will enjoy freedom of choice of sale and purchase of agri-produce. It will open more choices for the farmer, reduce marketing costs for the farmers. It will also promote barrier-free inter-state and intra-state trade and commerce outside the physical premises of markets notified under State Agricultural Produce Marketing legislations. 

    The other legislation will empower farmers for engaging with processors, wholesalers, aggregators, wholesalers, large retailers, exporters etc., on a level playing field without any fear of exploitation. It will transfer the risk of market unpredictability from the farmer to the sponsor and also enable the farmer to access modern technology and better inputs. It will reduce cost of marketing and improve income of farmers. 

    This legislation will act as a catalyst to attract private sector investment for building supply chains for supply of Indian farm produce to national and global markets, and in agricultural infrastructure. Farmers will get access to technology and advice for high value agriculture and get ready market for such produce, official said.

  • Government extends emergency credit line guarantee scheme

    Government extends emergency credit line guarantee scheme

    The Union Government has extended the Emergency Credit Line Guarantee Scheme (ECLGS) by one month till November 30th, 2020, or till such time that an amount of Rs. 3 lakh crore is sanctioned under the Scheme, whichever is earlier

    In view of the opening up of various sectors in the economy and the expected increase in demand during the ongoing festive season, the extension will provide a further opportunity to such borrowers who have not availed of the scheme so far, to obtain credit under the Emergency Credit Line Guarantee Scheme, the government said.

    The Emergency Credit Line Guarantee Scheme was announced as part of the Aatma Nirbhar Bharat Package (ANBP) to provide fully guaranteed and collateral free additional credit to MSMEs, business enterprises, individual loans for business purposes and MUDRA borrowers, to the extent of 20% of their credit outstanding as on 29th Feb, 2020.

    Borrowers with credit outstanding up to ?50 crore as on 29th Feb, and with an annual turnover of up to Rs. 250 crore are eligible under the scheme.

    Interest rates under the Emergency Credit Line Guarantee Scheme are capped at 9.25 per cent for banks and financial institutions and 14% for NBFCs.

    Tenor of loans provided under the Scheme is four years, including a moratorium of one year on principle repayment.

    As per data uploaded by Member Lending Institutions on the ECLGS portal, an amount of Rs. 2.03 lakh crore has been sanctioned under the Scheme to 60.67 lakh borrowers so far, while an amount of Rs. 1.48 lakh crore has been disbursed.

  • RBI notifies centre's interest waiver scheme including MSME loans

    RBI notifies centre's interest waiver scheme including MSME loans

    In a bid to provide relief amid the pandemic, the Reserve Bank of India (RBI) has notified the Centre's scheme for ex-gratia payment of difference between interest on loans of up to Rs 2 crore.

    "All lending institutions are advised to be guided by the provisions of the Scheme and take necessary action within the stipulated timeline," RBI said in a notification on Monday.

    The Finance Ministry last week had approved guidelines for the same scheme for grant of ex-gratia payment of the difference between compound interest and simple interest for six months of loans up to Rs 2 crore.

    The guidelines came after the Supreme Court directed the Centre to implement "as soon as possible" interest waiver on loans of up to Rs 2 crore under the RBI moratorium scheme in view of the COVID-19 pandemic.

    The lender will have to credit the amount to the account of the borrower on or before 5 November, giving relief to borrowers ahead of Diwali. Thereafter, the lender can claim reimbursement from the government by December 15.

    Under the scheme, the ex gratia payment -- the difference between compound interest and simple interest for six months -- will be made to borrowers whose aggregate loan sanctions and outstanding is not more than Rs 2 crore as on February 29, 2020. All categories of loans -- MSME, education, housing, personal, consumer -- and credit card dues will be eligible.

    The scheme can be availed by designated class of borrowers from March 1 to August 31, 2020.

    Housing loans, education loans, credit card dues, auto loans, MSME loans, consumer durable loans and consumption loans come under the ambit of the scheme.


  • A DBT for manufacturers: The Pioneer

    Direct Benenfit Transfer for manufacturers: 

    The PLI scheme is result-oriented. The cash incentives will be paid only if the manufacturers make the goods. It is a better alternative.The PLI scheme is result-oriented. The cash incentives will be paid only if the manufacturers make the goods. It is a better alternative.

    -by Subhash Chandra Pandey. The author is former Special Secretary, Ministry of Commerce and Industryhe author is former Special Secretary, Ministry of Commerce and Industry


    The Central Government has approved production-linked incentives (PLI) for manufacturers in 13 sectors. It essentially means that if an eligible manufacturer produces and sells/exports eligible goods worth Rs 100 crore, the Government will give him Rs 5 crore (assuming five per cent incentive) as a reward/incentive because such sale/export of locally manufactured goods will create local jobs.


    The PLI will be available for sale/export for the next five years in addition to the existing incentives. Now this is one of the concerns that remains for investors and would need to be addressed to make the scheme a success. As the PLI benefit has been assured only for five years, the investor has to assess the financial viability of the project beyond the PLI period. Once a manufacturing unit has been set up with a lot of fixed investment, recovery may be difficult. So the five-year period has to be utilised to make life easy for all businesses and job creators. In other words, the “ease of doing business” has to improve substantially.


    The Government expects that it may be called upon to pay about Rs 2 lakh crore, which means a total sale/export of about Rs 40 lakh crore (assuming five per cent PLI rate) during the next five years. This PLI will increase local manufacturing of eligible goods by an output equal to about 20 per cent of the current GDP.


    Thus, the second concern is changing growth dynamics and the global demand scenario, especially in the post-pandemic world. To get free cash of Rs 2 lakh crore from the Government, specified goods worth about Rs 40 lakh crore would need to be produced in India and a matching demand would be needed in a world where the cut-throat competition is going to deepen.


    The third concern is about how much of the PLI benefit would boost the investor’s actual post-tax income. In October, the Ministry of Electronics and Information Technology (MEITY) approved PLI benefits (four per cent to six per cent) to 16 companies. The PLI is available for incremental sales of goods manufactured in India five years subsequent to the base year (FY 2019-20).


    Now, whether the incentive of four per cent to six per cent of invoiced price for five years would be enough compensation to offset the cost disadvantage in India remains to be seen. One plus point in favour of the new manufacturing units is 15 per cent corporation tax that was announced last year. For them, manufacturers of highly branded products like Apple iPhones, the PLI scheme and reduced corporate tax are major incentives. Since such manufacturers face little competition for their products, they can set prices of their products on their own. The PLI benefit may or may not be fully passed on to the retail buyers in this particular case.


    Most other manufacturers may face stiff price competition and may not be able to fully pocket the PLI benefit to offset their cost disadvantage. Their discerning, hard-bargaining buyers will demand price discounts on the basis of the PLI benefit.


    The percentage of PLI benefit may vary across beneficiaries and depending on the competition, the post-tax actual benefit could vary from investor to investor. The PLI scheme, therefore, needs supplementation by sustained investor facilitation and improvement in ease of doing business.


    Incentives like income tax and Central excise exemptions, VAT/GST reimbursements, interest and insurance subsidies, subsidies on plant/machinery and so on are typically provided for industries set up in industrially-backward areas like North-eastern states.


    At present, the total manufacturing output of all items (whether PLI eligible or not) in a year is about 16 per cent of the GDP. The services sector has a 55 to 60 per cent contribution in GDP and has been a major employer so far.


    The PLI will be available to all new manufacturing units and also to existing manufacturing units for their extra production, additional over baseline output. For example, existing mobiles and electronics manufacturers are entitled to PLI benefit for whatever they produce over and above the 2019-20 level production in the next five years. The manufacturing units will have to apply, register and go through a vetting process and enter into proper agreement with the Government so as to ensure that only eligible manufacturers get the incentive for actual local manufacturing.


    On April 1, a PLI scheme promising Rs 40,951 crore incentive (four to six per cent of production value) was notified for manufacturers of mobile phones and other electronic components. Medical devices and bulk drugs (active pharmaceutical ingredients) were added to PLI eligibility in July and on November 11, 10 more manufacturing sub-sectors were added.


    Thus, Rs 1,97,291 crore of cash incentive has been promised in the next five years to manufacturers of automobiles and auto components (Rs 57,042 crore); mobile manufacturing and specified electronics/technology products (Rs 45,951 crore); advance chemistry cell batteries (Rs 18,100 crore); pharmaceuticals and drugs (Rs 21, 940 crore); medical devices (Rs 3,420 crore); telecom and networking products (Rs 12,195 crore); processed food (Rs 10,900 crore); man-made fibres and technical textiles (Rs 10,683 crore); high-efficiency solar PV modules (Rs 4,500 crore); white goods like ACs and LEDs (Rs 6,238 crore) and speciality steel (Rs 6,322 crore).


    For its move in October to approve grant of PLI benefit (four to six per cent ) to 16 companies, MEITY received a very good response from mobile handset manufacturers.


    The production of mobile phones surged from about Rs 18,900 crore in 2014-15 to Rs 170,000 crore in 2018-19. Samsung, Foxconn Hon Hai, Rising Star, Wistron and Pegatron have been granted PLI benefit only for manufacturing high-end phones (invoice value Rs 15,000 and above). 


    Foxconn Hon Hai, Wistron and Pegatron are contract manufacturers for Apple iPhones. They expect to have a major export turnover for high-end phones. Some Indian mobile phone companies, including Lava, Bhagwati (Micromax), Padget Electronics, UTL Neolyncs and Optiemus Electronics, have also been approved for PLI.


    This scheme aims to make India a manufacturing hub of global repute, reduce imports and generate employment. It covers both low-value and high-employment items like textiles and food as well as high-value and low-employment items like automobiles, mobiles, electronics, white goods, including high technology items like Advanced Chemical cell battery. Incentivising local manufacture of items like ACC battery, auto and electronics components will help India become part of the global value chains. The automobile industry turnover already accounts for almost half of the total value of manufactured items.


    The auto, electronics and pharma industries, which have substantial import dependence and also high export potential, are major beneficiaries of the scheme while textiles and processed food are major employment generators.


    A pertinent question is why should the Government give financial assistance of Rs 900 to a phone manufacturing company for every phone sold at Rs 15,000 (assuming six per cent PLI)? After all, more than half of the value of a phone may comprise imported components. The answer to this question is local employment.


    The exports, in any case, are tax-free. Under the WTO rules, a Government can refund all taxes collected from exports so that the local taxes are not exported to foreign buyers. So, whatever Customs, excise duties and GST are paid on exported items, they are eventually refunded by the Government. Often, exporters face the problem of working capital if the refund is delayed.


    There is a growing demand in the world for diversification in supply chains and India can become a major player. The promotion of the manufacturing sector means forward integration with global supply chains and backward linkages with the MSME sector.


    The domestic electronics hardware manufacturing faces a lack of a level-playing field vis-à-vis competing nations. It is assessed that it costs about 8.5 per cent to 11 per cent more to manufacture these items in India on account of lack of adequate infrastructure, domestic supply chain and logistics; high cost of finance; inadequate availability of quality power; limited design capabilities and focus on R and D by the industry; and inadequate skill development. Sunrise sectors need support in the initial stages.


    Traditionally, we have tried to attract investors with investment subsidies like giving land at concessional rates and subsidy on plant and machinery cost at a fixed percentage of say 15 per cent to 20 per cent of price. Thereafter, if the unit does not properly run, the subsidy goes waste. The PLI scheme is result-oriented. The cash incentives will be paid only if the manufacturers make the goods. It is a better alternative from the Government’s viewpoint.


    By Subhash Chandra Pandey (The author is former Special Secretary, Ministry of Commerce and Industry)

    The PLI scheme is result-oriented. The cash incentives will be paid only if the manufacturers make the goods. It is a better alternative.

    The Central Government has approved production-linked incentives (PLI) for manufacturers in 13 sectors. It essentially means that if an eligible manufacturer produces and sells/exports eligible goods worth Rs 100 crore, the Government will give him Rs 5 crore (assuming five per cent incentive) as a reward/incentive because such sale/export of locally manufactured goods will create local jobs.

    The PLI will be available for sale/export for the next five years in addition to the existing incentives. Now this is one of the concerns that remains for investors and would need to be addressed to make the scheme a success. As the PLI benefit has been assured only for five years, the investor has to assess the financial viability of the project beyond the PLI period. Once a manufacturing unit has been set up with a lot of fixed investment, recovery may be difficult. So the five-year period has to be utilised to make life easy for all businesses and job creators. In other words, the “ease of doing business” has to improve substantially.

    The Government expects that it may be called upon to pay about Rs 2 lakh crore, which means a total sale/export of about Rs 40 lakh crore (assuming five per cent PLI rate) during the next five years. This PLI will increase local manufacturing of eligible goods by an output equal to about 20 per cent of the current GDP.

    Thus, the second concern is changing growth dynamics and the global demand scenario, especially in the post-pandemic world. To get free cash of Rs 2 lakh crore from the Government, specified goods worth about Rs 40 lakh crore would need to be produced in India and a matching demand would be needed in a world where the cut-throat competition is going to deepen.

    The third concern is about how much of the PLI benefit would boost the investor’s actual post-tax income. In October, the Ministry of Electronics and Information Technology (MEITY) approved PLI  benefits (four per cent to six per cent) to 16 companies. The PLI is available for incremental sales of goods manufactured in India five years subsequent to the base year (FY 2019-20).

    Now, whether the incentive of four per cent to six per cent of invoiced price for five years would be enough compensation to offset the cost disadvantage in India remains to be seen. One plus point in favour of the new manufacturing units is 15 per cent corporation tax that was announced last year. For them, manufacturers of highly branded products like Apple iPhones, the PLI scheme and reduced corporate tax are major incentives. Since such manufacturers face little competition for their products, they can set prices of their products on their own. The PLI benefit may or may not be fully passed on to the retail buyers in this particular case.

    Most other manufacturers may face stiff price competition and may not be able to fully pocket the PLI benefit to offset their cost disadvantage. Their discerning, hard-bargaining buyers will demand price discounts on the basis of the PLI benefit.

    The percentage of PLI benefit may vary across beneficiaries and depending on the competition, the post-tax actual benefit could vary from investor to investor. The PLI scheme, therefore, needs supplementation by sustained investor facilitation and improvement in ease of doing business.

    Incentives like income tax and Central excise exemptions, VAT/GST reimbursements, interest and insurance subsidies, subsidies on plant/machinery and so on are typically provided for industries set up in industrially-backward areas like North-eastern states.

    At present, the total manufacturing output of all items (whether PLI eligible or not) in a year is about 16 per cent of the GDP. The services sector has a 55 to 60 per cent contribution in GDP and has been a major employer so far.

    The PLI will be available to all new manufacturing units and also to existing manufacturing units for their extra production, additional over baseline output. For example, existing mobiles and electronics manufacturers are entitled to PLI benefit for whatever they produce over and above the 2019-20 level production in the next five years. The manufacturing units will have to apply, register and go through a vetting process and enter into proper agreement with the Government so as to ensure that only eligible manufacturers get the incentive for actual local manufacturing.

    On April 1, a PLI scheme promising Rs 40,951 crore incentive (four to six per cent of production value) was notified for manufacturers of mobile phones and other electronic components. Medical devices and bulk drugs (active pharmaceutical ingredients) were added to PLI eligibility in July and on November 11, 10 more manufacturing sub-sectors were added.

    Thus, Rs 1,97,291 crore of cash incentive has been promised in the next five years to manufacturers of automobiles and auto components (Rs 57,042 crore); mobile manufacturing and specified electronics/technology products (Rs 45,951 crore); advance chemistry cell batteries (Rs 18,100 crore); pharmaceuticals and drugs (Rs 21, 940 crore); medical devices (Rs 3,420 crore); telecom and networking products (Rs 12,195 crore); processed food (Rs 10,900 crore); man-made fibres and technical textiles (Rs 10,683 crore); high-efficiency solar PV modules (Rs 4,500 crore); white goods like ACs and LEDs (Rs 6,238 crore) and speciality steel (Rs 6,322 crore).

    For its move in October to approve grant of PLI benefit (four to six per cent ) to 16 companies, MEITY received a very good response from mobile handset manufacturers.

    The production of mobile phones surged from about Rs 18,900 crore in 2014-15 to Rs 170,000 crore in 2018-19. Samsung, Foxconn Hon Hai, Rising Star, Wistron and Pegatron have been granted PLI benefit only for manufacturing high-end phones (invoice value Rs 15,000 and above). 

    Foxconn Hon Hai, Wistron and Pegatron are contract manufacturers for Apple iPhones. They expect to have a major export turnover for high-end phones. Some Indian mobile phone companies, including Lava, Bhagwati (Micromax), Padget Electronics, UTL Neolyncs and Optiemus Electronics, have also been approved for PLI.

    This scheme aims to make India a manufacturing hub of global repute, reduce imports and generate employment. It covers both low-value and high-employment items like textiles and food as well as high-value and low-employment items like automobiles, mobiles, electronics, white goods, including high technology items like Advanced Chemical cell battery. Incentivising local manufacture of items like ACC battery, auto and electronics components will help India become part of the global value chains. The automobile industry turnover already accounts for almost half of the total value of manufactured items.

    The auto, electronics and pharma industries, which have substantial import dependence and also high export potential, are major beneficiaries of the scheme while textiles and processed food are major employment generators.

    A pertinent question is why should the Government give financial assistance of Rs 900 to a phone manufacturing company for every phone sold at Rs 15,000 (assuming six per cent PLI)? After all, more than half of the value of a phone may comprise imported components. The answer to this question is local employment.

    The exports, in any case, are tax-free. Under the WTO rules, a Government can refund all taxes collected from exports so that the local taxes are not exported to foreign buyers. So, whatever Customs, excise duties and GST are paid on exported items, they are eventually refunded by the Government. Often, exporters face the problem of working capital if the refund is delayed.

    There is a growing demand in the world for diversification in supply chains and India can become a major player. The promotion of the manufacturing sector means forward integration with global supply chains and backward linkages with the MSME sector.

    The domestic electronics hardware manufacturing faces a lack of a level-playing field vis-à-vis competing nations. It is assessed that it costs about 8.5 per cent to 11 per cent more to manufacture these items in India on account of lack of adequate infrastructure, domestic supply chain and logistics; high cost of finance; inadequate availability of quality power; limited design capabilities and focus on R and D by the industry; and inadequate skill development. Sunrise sectors  need support in the initial stages.

    Traditionally, we have tried to attract investors with investment subsidies like giving land at concessional rates and subsidy on plant and machinery cost at a fixed percentage of say 15 per cent to 20 per cent of price. Thereafter, if the unit does not properly run, the subsidy goes waste. The PLI scheme is result-oriented. The cash incentives will be paid only if the manufacturers make the goods. It is a better alternative from the Government’s viewpoint.

    By Subhash Chandra Pandey (The author is former Special Secretary, Ministry of Commerce and Industry)

Technology Upgradation and Quality Certification

Marketing Promotion Schemes

Entrepreneurship and Skill Development Programs

A Scheme for Promotion of Innovation, Rural Industries and Entrepreneurship (ASPIRE)