Eligible investors involved in the manufacture of air conditioners, LED lights, and related components as well as solar modules will be granted incentives under the latest production-linked schemes. The schemes are implemented on a nationwide basis, seek to upgrade existing technologies, establish industrial ecosystems, and boost export activity.
On April 7, the Indian government approved PLI schemes for specific white goods and solar modules, with a five-year cumulative budget outlay of INR 107.38 billion (approx. US$1.43 billion).
Total incentives applicable under the Production Linked Incentive (PLI) Scheme for White Goods (Air Conditioners and LED Lights) will cost the government INR 62.38 billion (approx. US$831.27 million).
Total incentives for eligible investors in the production of solar modules will cost the government INR 45 billion (approx. US$599.99 million) under the Production Linked Incentive (PLI) Scheme ‘National Programme on High Efficiency Solar PV (Photo Voltic) Modules’.
How the PLI scheme applies to the white goods sector
The PLI Scheme for White Goods will extend an incentive of four to six percent on incremental sales of air conditioners and LED lights to companies that manufacture these goods in India, for a period of five years.
The PLI scheme separately earmarks different segments for types of components to attract targeted global investments and develop a component ecosystem within India.
To be eligible, companies must propose the manufacture of components or sub-assembly that is currently not done in sufficient capacity in India. In other words, the applicants must propose a significant investment into creating new manufacturing capabilities in the country. As such, companies engaged in the assembly of finished goods will not be eligible for incentives under this scheme.
Companies that meet the pre-qualification criteria for different target segments will be eligible to apply to the PLI Scheme.
Incentives will be open to companies making either brownfield and/or greenfield investments. Thresholds of cumulative incremental investment and incremental sales of manufactured goods over the base year must be met to claim incentives.
An entity that secures benefits under any other PLI Scheme for the same products cannot apply to this scheme. However, the entity participating in the PLI Scheme may take benefits under other applicable national schemes or state government schemes.
Companies in the AC and LED industries that apply for PLI benefits have to meet the compulsory BIS and BEE Quality standards for sales into domestic market and applicable standards for global markets.
How the PLI scheme applies to the solar energy sector
The National Programme on High Efficiency Solar PV (Photo Voltic) Modules seeks to build up the indigenous manufacturing capacity of giga watt (GW) scale in high efficiency solar PV modules.
Currently, India’s solar power generation depends on imported solar PV cells and modules as the domestic manufacturing industry has limited capacity. The sector’s PLI Scheme aims to reduce import dependency as national renewable power production is of strategic importance to India.
Eligible solar PV manufacturers will be selected through a transparent and competitive bidding process. Production-linked incentives will be disbursed for a period of five years, after the commissioning of the solar PV manufacturing plants, and on sales of high efficiency solar PV modules.
Manufacturers will be rewarded for higher efficiencies of solar PV modules and if they source their material from the domestic market. Thus, the PLI amount disbursed will increase with increased module efficiency and increased local value addition.
The intended outcomes of the scheme are as follows:
- Additional 10,000 MW capacity of integrated solar PV manufacturing plants in India
- Direct investment of around INR 172 billion (approx. US$2.30 billion) in solar PV manufacturing projects
- Demand of INR 175 billion (approx. US$2.35 billion) over five years for ‘Balance of Materials’
- Direct employment of about 30,000 and Indirect employment of about 120,000 persons
- Import substitution of around INR 175 billion (approx. US$2.35 billion) every year
- Impetus for R&D to achieve higher efficiency in solar PV modules
The DPIIT and the Ministry of New and Renewable Energy will soon come out with detailed operational guidelines for companies to avail the incentives.
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