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PLI schemes and why they work

The pandemic has turned the spotlight on being Atmanirbhar and the government’s new schemes are just the steps in the right direction.

After independence India’s economic policies were largely based on socialistic principles. Foreign investment and companies from the West were shunned and our government and the erstwhile Planning Commission emphasised on making the nation self-sufficient, as their primary objective.

However, there was one stumbling block that is India’s private sector was in its infancy as it could not afford to invest in primary industries that was required to give birth to modern industrialisation. As a result, public sector enterprises were left with the task of industrialising India. Within a few decades, the inefficiency of India’s public sector was rudely exposed.

Almost all our government run firms were running in losses, draining the nation’s resources. Since 1978, China and the Southeast Asian nations have opened up to foreign investments and private industry. Within a decade, East and Southeast Asia rushed ahead of India, in almost every economic parameter. Products which India already produced herself, were now cheaply imported from China.

As the COVID-19 pandemic hit the world economy last year, the importance of being ‘Atmanirbhar’ came into focus. The Prime Minister pointed out the only way forward for India, was through local industries. To create jobs and get rid of India’s unemployment plague it is imperative that the domestic manufacturing sector be boosted.

The Government introduced a Production Linked Incentive (PLI) scheme for the manufacturing of large-scale electronics, in April 2020. In November 2020, the PLI scheme was extended to 10 other sectors — chief among them were food processing, battery storage, automobile components and specialty steel. Under this scheme, companies would be rewarded for increasing their output with respect to a defined base year. The PLI scheme has a simple framework — reward for increased production.

PLI schemes and why they work
 

The right direction

Over 130 pharmaceutical companies have expressed interest in the PLI schemes for APIs and medical devices. On March 12, 2021, the government approved a committed investment of `5,082.65 crore under the PLI scheme for APIs. On April 7, the Union Cabinet announced a `6,238-crore PLI scheme for white goods (air-conditioners and LED lights) and a `4,500-crore PLI scheme for high-efficiency solar photovoltaic modules. With the advent of PLI schemes, governments can ensure that incentives are handed out to the deserving party only when they produce.

Planning a better future for tomorrow

The COVID-19 pandemic has opened our eyes to the importance of public health. It has made us realise that unless the entire population has access to quality healthcare, all of us are at risk.

However, something the society needs to pay more heed to, is the threat posed by climate change. This month, the percentage of carbon dioxide in the Earth’s atmosphere reached the highest level ever in human history. Climate catastrophes like floods, droughts, cyclones, and erratic monsoons cause massive amounts of economic damage.

PLI has brought hope to climate action, by incentivising companies to produce goods that would replace the most polluting technologies. On April 7, the government approved a PLI scheme for high-efficiency solar photovoltaic modules. This is a step towards replacing energy from fossil fuel sources. But PLIs have the scope for going further than that. Who knows, maybe in the future we will see coal being replaced in cement plants and steel furnaces, with hydrogen fuel?

But for such dreams to come true, PLIs will surely have to play a major role in making India ‘Atmanirbhar’ in essential raw materials, commodities, and green technologies.

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Printable version | Aug 4, 2021 10:58:29 AM | https://www.thehindu.com/brandhub/pli-schemes-and-why-they-work/article34368237.ece

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