In a recent move to encourage domestic manufacturing, the Government of India has proposed to introduce an umbrella production-linked incentive (PLI) scheme with an allocation of about Rs 40,000 crore for replacing the current Merchandise Exports India Scheme (MEIS) scheme introduced, which was introduced in April 2015. MEIS aims at promoting manufacturing and exports of specified goods from India.
A meeting chaired by the Cabinet Secretary was recently held, which discussed measures to promote domestic manufacturing, undertake import substitution, and structuring details of a universally applicable PLI and phased manufacturing program (PMP) schemes.
With the umbrella scheme being proposed, any ministry would be able to adopt the revised scheme that brings about viable plans on import substitution and promote domestic manufacturing. The government is expected to fund the new scheme with an initial allocation of Rs 40,000 crore in the current year with allocation increasing by about 10 percent every year depending on the need.
Like the current PLI scheme, the umbrella scheme would be operational for a period of 5 years. The allocation from the scheme would be what was required under MEIS. The government is also mulling to expand the scope of PLI to cover an addition of 10 more sectors including air conditioners and TV sets, among others.
A phased manufacturing program (PMP), to be soon launched, will cover the areas of import substitution and where some domestic manufacturing capability exists, including select electronics items and power equipment, among others. Under this scheme, the government will provide duty protection to the sectors for a limited time for setting up manufacturing. A plan for duty increase is also being looked for solar modules and cells.
The government plans to phase out MEIS by December 2020 as it did not yield the desired results. Even with liberal application of scheme across sectors, the exports remained nearly stagnant. The liability under MEIS ballooned to from Rs 20,000 crore to about Rs 45,000 crore in 19-20, reaching an unsustainable level. However, during the period, the country’s exports remained range-bound. In 2014-15, Indian exports were $310 billion and in 2019-20, the export figure was $313 billion. So, the finance ministry has restricted MEIS benefits to just Rs 9,000 crore in FY21 and plans to use the savings for the sector focused PLI scheme. – TVJ Bureau