Budget 2024 And PLI Scheme: More Sectors Seek Sops, Look Gift Horse In Its Generous Mouth

The latest to queue up for benefits or wider presence are leather goods units, healthcare workers, underground mining firms and jewellery designers.

Overtures are also being made to have the PLI carrot extended to the defence sector and public sector units, particularly those engaged in infrastructure development – setting up and maintaining roads, railroads, ports and similar urban projects.

However, existing beneficiaries of the scheme are a cautious lot, waiting for the promised cash incentives to reach their bank accounts. Only 5 per cent of the applicants have received payouts and they are concerned, having already invested Rs 1.03 lakh crore till November 2023, as per government data.

The good news is that the investment seems to be paying off, notching up production of Rs 8.61 lakh crore and generating nearly 6.8 lakh jobs.

Low Incentive Payouts Cause For Concern

On to the concern. So far, incentives of only Rs 4,415 crore (5 per cent) have been disbursed to eight beneficiary sectors – electronics manufacturing, IT hardware, bulk drugs, medical devices, pharmaceuticals, telecom and networking products, food processing, and drones and components. The last payout was released in mid-January this year.

The PLI scheme, launched in March 2020, received a fillip in February’s Interim Budget with a Rs 6,200-crore outlay, an increase of 33.8 per cent from Rs 4,645 crore in FY 2024. With more industry sectors clean to clamber on, the ramp-up in the full Budget could see overall outlay breach the Rs 8,000-crore mark. However, the low level of payouts is disturbing for both existing and new beneficiaries.

It has been learnt that following repeated concerns on this front, the Government has begun accepting applications for release of incentives on a quarterly basis, compared to the earlier norm of annual payouts.

Also, new areas likely to be covered under the scheme soon are toys, furniture and apparel, predominantly made up of micro, small and medium enterprises (MSMEs), thus labour-intensive and cost-sensitive.

MSMEs and Jobs In Focus

The Government may also expand the PLI scheme to include man-made fibre and technical textiles to cover cotton-based apparel. This is clearly a bid to on-board MSMEs onto the PLI carpet, to catalyse job-creation and revive a sector that has been ailing since it was hit by the double whammy of demonetization and implementation of the GST regime.

One sector being considered for inclusion in the PLI scheme stands out in stark contrast – underground mining – in that it has traditionally been dependent on human muscle and labour.

Companies operating in this space, led by Coal India Limited, have been focussing on mechanization over the last few years and imported electric and hydraulic shovels, dumpers and crawler dozers, drills and motor graders, and front-end loaders. The logic has been to hike productivity and reduce cost-intensive labour.

For this sector, a five-year PLI scheme is being considered to provide a booster shot to the production of Indian coal, an import substitute and a dire need at power-generating firms. Apart from the cost of machinery, duties of Rs 1,000 crore are paid annually. If this proposal receives approval after ongoing diligence, it would save precious forex for the country.

Leather, Defence And Healthcare Want More

The healthcare industry is expecting wider inclusion and increased allocation to fund its pursuit of medical research and digital health initiatives. Similarly, the pharmaceutical and biotechnology sectors, piggybacking on the medical devices space, are seeking support to reduce import dependencies. Faster approvals and availability of new biologicals is also being sought, which could bring down healthcare costs significantly.

Leather goods manufacturers have also set their sights high from the PLI scheme, hoping this will provide a dual fillip – greater investments for capacity expansion and modernisation, as also boost raw material exports, an area where India has been lacking in comparison to other South-East Asian nations.

An unlikely applicant seeking PLI benefits comes in the form of the defence sector, which wants to use the incentives to modernize, thereby making India more self-reliant and export-competitive. It remains to be seen whether PLI announcements in the Budget shoot straight and true on this front.

Moving on to the world’s largest rail network, the Indian Railways, there is anticipation of increased electrification, network growth, safety and modernization. In tandem with PLI, what could help is the National Infrastructure Pipeline, which is prodding PSUs in ancillary industries to expand their infrastructure spends. Strange as it may sound, a word of advice for investors is to opt for a staggered approach to buying, instead of a one-off dip.

Consumer On The Street Has A Different Take

The average Indian on the street, however, remains sceptical on the PLI process, questioning the fuss and fess on this front when larger and burning issues remain unresolved.

“It is weird to see people hanker for a consumption stimulus without inflation levels reaching the targeted 4 per cent. India faces the challenge of lowering deficits and increasing the Income-Tax net, not just hand out deductions or sops,” says Kamran Akhtar, a copywriter in J&K’s Ganderbal district.

“Inflation is at over 9 per cent and joblessness is breaching 45 per cent. Given this backdrop, if at all there is to be any stimulus, it should go towards agriculture production and storage, rather than consumption. We are anyway struggling to produce enough with climate issues causing numbing food inflation,” said Pramod Thakur, senior manager with Hitachi India.

Industry, though, feels differently, as Anant Goenka of RPG Group sums up: “PLI has been a great success in the manufacturing space and we hope the ambit is increased, so that new jobs are created across segments…”

Clearly, there are opposing views on the still-evolving PLI concept and the Finance Ministry has its hands full and task cut out. In the first Budget from a non-majority regime in over a decade, the BJP-led Government has the unenviable task of pulling off a deft balancing act. It is a critical walk, and Tuesday morning will reveal how the beam holds up.

(Rajeev Narayan is a New Delhi-based jouranlist and commentator. Views expressed are personal)