Centre plans overhaul of PLI schemes to boost MSME sector

The government is set to revamp the production-linked incentives (PLIs) by easing fund release norms, expanding the scheme to more sectors, and providing special carve-outs for MSMEs (micro, small, and medium enterprises) in labor-intensive industries, according to media reports.

The proposed restructuring will also include incentives for research and development (R&D) to foster a robust manufacturing ecosystem. The government has already started accepting applications for quarterly release of incentives, shifting from the previous annual disbursement schedule.

New sectors such as toys, furniture, and apparel will soon be included under the PLI scheme due to their significant job creation potential. Additionally, the government may broaden the PLI scheme for man-made fiber (MMF) and technical textiles to incorporate certain cotton-based apparel, with announcements expected in the forthcoming budget.

Exceptions to the new quarterly disbursement norm will be made for schemes where the payout amounts are minimal, making compliance difficult for departments. The PLI for food processing is one such example, as noted in the reports.

The total outlay for the PLI scheme stands at Rs 1.97 lakh crore (over $26 billion), with only Rs 9,700 crore disbursed by March 2024. In FY24 alone, incentives totaling Rs 6,800 crore were provided across various sectors.

As of December 2023, PLI companies have invested approximately Rs 1.07 lakh crore, resulting in incremental sales exceeding Rs 9 lakh crore and the creation of 7 lakh jobs.

The PLI scheme was originally launched in March 2020 for raw materials in the pharmaceutical industry, medical devices, and large-scale electronics manufacturing. It expanded in November 2020 to include 10 more sectors and added PLI for drones in September 2021.