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How the recent development in the PLI scheme will give the upperhand to Indian manufacturers: Experts' opinion

When the production-linked incentive, or PLI, scheme was announced, it provided varying degrees of fiscal support to different sections

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The government recently modified the Rs 76,000 crore incentive scheme for semiconductor and display manufacturing units, offering to pay 50% of the project cost across all categories of factories as it seeks to entice global players to set up production bases in India to reduce reliance on imports.

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Now 50% of the project cost across all technology nodes for establishing semiconductor fabs, including cutting-edge computing chips and those used in the power, telecom, and automotive sectors will be funded by the government. 

​​When the production-linked incentive, or PLI, scheme was announced (last December), it provided varying degrees of fiscal support to different sections for developing India's semiconductor and display manufacturing ecosystem. These ranged from 30% to 50%. 

​​The scheme was initially introduced in India to incentivize companies for incremental sales of products manufactured in India over the base year. They have been particularly intended to increase domestic manufacturing in the sunrise and strategic sectors, minimise import bills and curb cheaper imports, improve the cost competitiveness of domestically manufactured goods, and promote domestic capacity and exports.

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PLI aims to provide subsidies to companies that manufacture their goods in the country. These schemes are linked to the organisation’s performance. This means that the government offers incentives for additional sales in the form of tax breaks or reduced import duties. 

The Indian semiconductor market in 2021 was valued at USD 27.2 billion, and it is expected to grow at a healthy CAGR of nearly 19% to reach USD 64 billion in 2026. However, none of these chips are currently manufactured in India.

“This scheme will get more players: “The semiconductor industry is an important and time taking component in the electronics ecosystem for countries like India. All our efforts to make motherboard and networking will get more local components with the rise of the semiconductor industry. We are happy that a very positive tweaking on the PLI is done by India Semiconductor Mission. This is now more encompassing in getting all the aspects of semiconductor and the sub ecosystem like manufacturing, packaging, testing, and design. We already see some good investments being promised and I am sure this is going to get more players in the industry.” said Sanjay Lodha, Co-founder of Netweb Technologies, 

The government has identified the gaps and is now coming up with a very clear roadmap on how to address them. They are also looking at different funding models and ways to make this happen. This will give a significant boost to the semiconductor industry in India and help create more jobs.

Throwing light on the tweaked PLI scheme, Avneet Singh Marwah, CEO at SPPL (Super Plastronics) said, “Government is really proactive on PLI scheme of semiconductors and panels, need to appreciate the companies which are able to persuade the ministry. As these projects are capital incentives, without government subsidies it’s difficult to pursue. To become plus one, India needs to learn from china as most of the display manufacturing units are either co-owned by the state government of china or they get huge subsidies from the government to operate their units.”

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