“The real problem is, we are still trying policy shortcuts... Perhaps the government should pause and first assess whether PLI works”

mitted its PLI claims for year one. However, the government has been delving into its records for almost a year. Other companies such as Apple’s contract manufacturer Hon Hai (Foxconn) and Wistron are in the process of filing their claims.

To claim benefits in the first year of the scheme, a global smartphone manufacturer must invest Rs 250 crore and achieve minimum incremental sales of Rs 4,000 crore. The firm can claim incentives for sales up to Rs 15,000 crore and only for devices priced at Rs 15,000 or more. For domestic companies, the investment target is set at Rs 50 crore and they are required to produce phones worth Rs 500 crore in the first year.

Samsung was the only company to meet the production targets in FY21—the first year of the scheme. Meanwhile, the government extended the tenure of the scheme by a year to six years, with the firms given the option to choose any of the five years to meet the targets and claim the incentives. Apart from global firms, seven domestic firms, including the Lava Group, Dixon Technologies and Micromax, had applied for the scheme.

THE PHARMA BOOST

The PLI scheme for the pharmaceutical sector was announced in 2020 to encourage indigenous manufacturing of critical ingredients. “Through the PLI scheme, the government has tried to reduce imports by encouraging domestic manufacturing of pharmaceuticals,” said health minister Mansukh Mandaviya. Around 55 companies have qualified for the scheme, including Sun Pharma, Biocon, Wockhardt, Torrent Pharma, Glenmark, Lupin and Aurobindo Pharma, besides 20 MSMEs. The scheme provides incentives worth Rs 15,000 crore on the incremental sales of pharmaceutical goods and in-vitro diagnostic medical devices. The overall cost of production of bulk drugs in India is around 20-30 per cent lower than in China.

However, big Indian pharma companies have voiced the need to expand the scheme to link it to research—especially in biologics and biosimilars. Biocon Group’s executive chairperson Kiran Mazumdar-Shaw iterated at an event, BioAsia 2022, in February that there was a need for a different PLI scheme that focused on emerging opportunities for Indian pharma since the scheme so far had been skewed towards generic drugs. A much greater allocation is needed for biologics, biosimilars and cell and gene therapies. Biocon could not qualify for the Category A companies because it does not have that many ANDAs (abbreviated new drug applications). ANDA is data submitted to the US Food and Drug Administration for review and potential approval of a generic drug product. “If we look at our own PLI scheme, a huge emphasis was given to ANDAs... We are talking about aatmanirbhar in terms of what we don’t produce in chemical and generic drugs... There is not enough risk capital to encourage innovation,” Sanjeev Navangul, MD & CEO, Bharat Serums and Vaccines, said at the event.

“A country whose manufacturing has been ravaged for over six decades by successive govts will need time to return to a global scale”

A FAST LANE FOR AUTO

Automobiles are one of India’s oft-quoted success stories. In March, the government shortlisted 95 major auto and auto component manufacturers such as Bharat Forge, Hero MotoCorp, Bosch India, Ola Electric, Bhel and Ceat out of 115 applicants for incentives under the PLI scheme. The scheme has two components—Champion OEM Incentive Scheme and Component

Champion Incentive Scheme. The proposed investments of Rs 45,016 crore and Rs 29,834 crore are for approved applicants under Champion OEM Incentive and Component Champion Incentive schemes, respectively. The idea is to attract manufacturing of those components in the global supply chain of the auto sector. “PLI is for five years. We are still under the Covid impact,” says Deepak Jain, CMD, Lumax Industries, an auto component firm. “In the auto and auto component sectors, PLI will be on advanced technologies, purely looking at localising these technologies. Advanced technologies do have time since companies have to align themselves with the standard operating procedures of the customer.” The direction that the government has set with the PLI is very critical and the new investments are coming in now, he adds.

PROMISES VS CONCERNS

Raghuram Rajan was scathing in his attack while questioning the efficacy of the scheme, saying that Indian manufacturing, per the government’s own admission, has a competitive disadvantage of 8.5-11 per cent on account of factors such as the lack of adequate infrastructure, the high cost of finance, inadequate availability of quality power, limited design capabilities, neglect of R&D and inadequate skills. “Since addressing these weaknesses will take time, the government wants a faster alternative,” he said in the piece he co-wrote with research scholar Rohit Singh Chauhan.

Is PLI a faster alternative? “Admittedly, unless there was a short-term measure, it would be virtually impossible to shift global supply chains and manufacturing to India. It cannot be anybody’s case that the 14 disabilities can be addressed in the short term, especially during the period when geopolitics is forcing global supply chains to shift, at least in part, away from China,” says an industry insider. “If India had waited to address each of the problems that have been created over the past 65-70 years, this opportunity