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Chinese firms may find a way into PLI scheme

Though Chinese companies have not applied for the production-linked incentive (PLI) scheme for white goods fearing disqualification, companies that qualify are likely to be allowed to tie up with Chinese firms for technology transfer, said a senior government official, seeking anonymity.

India has put stringent rules to verify investment proposals from countries it shares its land boders with, following clashes with Chinese troops in June 2020.

“Chinese companies have not applied may be because they know they have to get so many clearances. But you can’t just shut them away completely. Some of the qualifying companies may tie up with Chinese companies for transfer of technology,” the official added

India introduced trade and non-trade barriers against China following a border clash that left 20 Indian soldiers dead in 2020. It put all foreign direct investments from neighbouring countries it shares a land borders with through the approval route. It also barred such firms from participating in government procurements.

In September, the Centre also imposed a complete ban on imports of air-conditioners with refrigerants, to further tighten norms on “non-essential imports” and encourage local manufacturing. The PLI scheme for white goods is designed to build an end-to-end component ecosystem for ACs and LED lights to make India an integral part of the global supply chain. The scheme will extend benefits of 4-6% on incremental sales for five years subsequent to the base year and one year of the gestation period.

So far, 52 firms have committed to investing ₹5,866 crore under the PLI scheme for white goods—while 31 firms have committed about ₹4,995 crore for AC component manufacturing, 21 firms will invest ₹871 crore for LED components.

The companies include Daikin, Panasonic, Hitachi, Mettube, Nidec, Voltas, Bluestar, Havells, Amber, EPack, TVS-Lucas, Dixon, R K Lighting, Uniglobus, Radhika Opto and Syska.

Incentives for component manufacturing have proved to be the right move, with the government receiving a huge response for three main AC components—compressors, copper-tubing and aluminium fins. “At present only one firm makes compressors. Now we have got four firms seeking to make compressors in India and capacity indicated is about 12 million. Hindalco is coming to build aluminium fins to cater to 10 million ACs annually. In copper tubing, the best companies are coming with Mettube alone may cater to 15 million ACs.” India’s annual market for ACs is at 7.5 million units, out of which 6 million are assembled with just 25% domestic value addition. “ACs made can go up to 23-24 million annually and domestic value addition may be at 75%,” he added

Madan Sabanavis, chief economist, Care Ratings, said the PLI scheme can not only boost production, but also has the potential to lower the dependence on imports. “Imports of electronics can come down, which is a major group after petroleum, oil, and lubricants, in the import bill. The total incentive for electronic based goods will be ₹60,000-70,000 crore, or around $9-9.5 billion over 4-6 years. Intuitively if this helps reduce the import bill by even 10% over this period, the incentive provided would have worked well,” he added. LiveMint

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