Despite the efforts by the Centre to enhance efficiency and increase incentive disbursements across all sectors, only 11 per cent of the outlay or around Rs 326 billion is expected to be utilised for the production-linked incentives (PLI) and Design-linked incentives (DLI) by the end of the current financial year (FY25), based on the budget estimates, according to a report by Icra.
The report stated that out of the total capital expenditure (capex) of around Rs 4 trillion to be incurred by the corporates under the PLI and DLI schemes, Rs 1.28 trillion had already been invested as of May 2024. This investment is equivalent to 30 to 35 per cent of the total estimated capex, as per Icra.
The disbursement of incentives has resulted in the growth of sectors such as pharma, mobile phones and food products as the progress in manufacturing is visible, Icra highlighted. In contrast, the sectors such as solar PV modules, auto and steel have received minimal disbursements. These sectors have longer gestation periods to start commercial operations and thus require higher capital deployment.
Icra reported that the incentives under most of the sectors are linked to incremental sales or production. The current capex deployment has resulted in incremental sales of around Rs 10.8 trillion as of May 2024. This is equivalent to 25 to 35 per cent of the total incremental sales anticipated. The incremental sales or production through the incentive-linked scheme was expected to be around Rs 35 to 40 trillion.
In FY22, the Centre introduced the PLI scheme and subsequently the DLI scheme in 14 sectors to reduce imports, attract investment and technology and boost manufacturing and exports by making Indian manufacturers globally competitive. Icra reported that the Centre is planning to introduce additional incentive schemes for new sectors like toys, footwear and leather which could aim to attract anchor investors.
The government of India has been adjusting allocations, inviting applications and refining schemes to increase the incentive disbursement across all sectors, Icra mentioned in its report.
