Why in the News?

Six out of the 14 Production-Linked Incentive (PLI) schemes, including textiles, solar modules, IT hardware, automobiles, advanced chemical cells (ACC), and speciality steel, are progressing at a relatively slower pace.

What are the primary reasons for the slow implementation of PLI schemes?

• Stringent Eligibility Norms: Many industries have reported that the eligibility criteria for participation in PLI schemes are too stringent, which limits the number of companies that can benefit from the incentives.
• Initial Setup Challenges: Establishing a domestic manufacturing base from scratch is a monumental task. Industries such as solar modules and advanced chemistry cells (ACC) require substantial time—ranging from one-and-a-half to three years—to set up manufacturing operations, delaying employment generation.
• Access to Resources: Companies face difficulties in accessing critical resources, including Chinese machinery and skilled technicians, which can hinder their ability to ramp up production quickly.
• Market Dependency: Some sectors remain heavily reliant on imports and have not yet transitioned to a self-sufficient manufacturing model, impacting their growth under the PLI framework.
• Slow Disbursement of Funds: The initial years of the scheme saw minimal disbursement of funds, with only a small percentage of the total incentive outlay being paid out in the first two years.

Which sectors are experiencing the most significant slowdowns, and why?

• Textiles: This sector is struggling due to high competition and stringent norms that have slowed down participation and growth.
• Solar Modules: Despite being a strategic sector for renewable energy, delays in establishing manufacturing capabilities have led to slow progress. 
  • As of June 2024, India’s solar module manufacturing capacity reached 77.2 GW, but the solar cell capacity was only 7.6 GW, leading to supply shortages that delayed projects.
• Automobiles: While some companies are making progress, the automobile sector overall is hindered by initial setup challenges and fluctuating market conditions. 
  • Factors such as rising raw material costs and shifts in consumer preferences towards electric vehicles are creating a complex environment for traditional automakers.
• Advanced Chemical Cells (ACC): Similar to solar modules, this sector faces long commissioning periods that delay employment outcomes. Because of the lengthy development timelines for manufacturing facilities and the need for substantial investment in technology are contributing to slower growth in this strategic area.
• IT Hardware: Although recently upgraded with increased funding, it still lags behind in implementation compared to more successful sectors like mobile manufacturing.

What measures can be taken to enhance the effectiveness of PLI schemes? (Way forward)

• Revising Eligibility Criteria: Simplifying the eligibility requirements could encourage more companies, especially smaller firms, to participate in the schemes and benefit from incentives.
• Increasing Support for Supply Chains: Establishing robust supply chains is crucial. The government could provide additional support to smaller suppliers who are essential for scaling up production across sectors.
• Streamlining Resource Access: Facilitating easier access to necessary machinery and skilled labor can help companies ramp up production more effectively and reduce dependency on imports.
• Regular Reviews and Adjustments: Continuous monitoring and adjustments based on sector performance can help identify bottlenecks early and allow for timely interventions.
• Encouraging Ancillary Industries: Promoting the establishment of ancillary industries around larger beneficiaries could create additional jobs and enhance local manufacturing capabilities.

Mains PYQ:

Q  Can the strategy of regional-resource-based manufacturing help in promoting employment in India? (UPSC IAS/2019)

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