Production-Linked Incentive Scheme Extended Until 2025-26

The Union Finance Minister announced the extension of the Production-Linked Incentive (PLI) scheme by one year on Monday. The PLI scheme was supposed to be launched in 2020-21 and continue for five years. However, with the extension of one year, it will now remain until 2025-26. The participating companies will have five years to meet the scheme’s production targets. 

The base year for incentives under the PLI scheme was 2019-20. However, several companies were unable to record incremental sales as the COVID-19 pandemic hit them hard. The scheme offers an incentive of 6% to 4% for companies seeing incremental sales of goods manufactured in India and specified under the target segments for five years, starting from the 1st of August 2020. The base year is 2019-20. 

The base year for incentives under the PLI scheme was 2019-20. However, several companies were unable to record incremental sales as the COVID-19 pandemic hit them hard, which disrupted production due to reduced staff at the production units. The lockdown restrictions also delayed the installation of machinery and disrupted the supply chain. 

As per the extension announcement made by Nirmala Sitharaman, the Finance Minister of India, the participating companies will now have the option to choose any five to meet the production target under the PLI. The scheme has been extended until 2020-21. Also, the investments that were made in 2020-21 will be eligible under the scheme. 

The Union Cabinet had approved ten sectors under the scheme in November 2020. These sectors are; automobiles and auto components, solar modules, speciality steel, advanced chemistry cell battery, telecom and networking products, pharmaceuticals, food products and white goods. In February 2021, IT hardware and laptops were included in the list. 

The PLI scheme came into effect on the 1st of April 2021 for white goods. An incentive worth Rs 6,238 crore is offered for the eligible companies in the LED manufacturing and air conditioning space under this programme. The companies will have to overachieve their production numbers for the base year. The size of the PLI scheme for IT hardware and laptops is approximately Rs 7,350 crore for four years.

For any clarifications/feedback on the topic, please contact the writer at vineeth.nc@cleartax.in

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