ANNOUNCEMENT 16 Apr 2021

India has announced a production-linked incentive for Air-Conditioners, LED lights, and their components.

NUMBER OF INTERVENTIONS

3

  • 3 harmful
  • 0 neutral
  • 0 liberalising
Inception date: 16 Apr 2021 | Removal date: 31 Mar 2024

Production subsidy

On 16 April 2021, the Indian Ministry of Commerce and Industry notified the Production Linked Incentive Scheme (PLI) for white goods (Air Conditioners and LED lights) manufacturers in India. The scheme will provide production-linked financial support for a period of 5 years to manufacturers of components of ACs and LED lights. The total budget of the scheme is INR 6268 crore (~USD 841 million) and was announced on 11 November 2020 (see related State Act).

The objective of the scheme is to "remove sectoral disabilities, create economies of scale, enhance exports, create a robust component ecosystem, and generate employment". To achieve this, the scheme will select entities that manufacture components or sub-assemblies that are not sufficiently manufactured in India. Further, the scheme will give priority to companies that invest in basic or core components.

The scheme will extend a 4% to 6% incentive on incremental sales calculated over the base year (2019-2020). The incentive will reduce from 6% in the first year to 4% in the 5th year. The incentive for the years 2022-2023 and 2023-2024 will be 6%.

For the purposes of the scheme, the entities will be classified based on the type of goods they manufacture and the level of investment they make. For Air-Conditioners, companies will be classified into ones that manufacture i) components, ii) High-Value Intermediates (copper tubes, aluminum foil, and compressors), or iii) Low-Value Intermediates (PCB assembly for controllers, BLDC motors, Services valves, and Cross Flow fans for AC and other components). Within each category, the firms will be differentiated into ones that make "Large Investments" and ones that make "Normal Investments". Similarly, for LED lights, the categories are i) LED lighting products (core components such as LED chip packaging, resistors, ICs, fuses, and large scale investments and other components) and ii) Components of LED lighting products (such as LED chips, drivers, engines, mechanicals, packaging, modules, wire wound inductors, and other components). These are further divided into large and normal investments. The rates of incentive for normal and large investments are the same, but large investments will be given preference over normal ones in project selection.

To be eligible under the scheme and be eligible for disbursement of incentive, the companies will have to meet incremental investment and incremental sales targets of the manufactured product over the base year. The cumulative investment target, over 5 years, for AC components and intermediates range from INR 100 to INR 600 crore (~USD 13 to USD 80 million) for Large investments and from INR 50 crore to INR 300 crore (~USD 6.7 to USD 40 million) for Normal investments. The cumulative sales target range from INR 1500 to INR 9750 crore (~ USD 201 million to USD 1.31 billion) for Large investments and INR 37 to INR 199 crore (~USD 5 to USD 26.7 million) for Normal investments. The cumulative investment target for LED lights and components ranges from INR 25 crore to INR 300 (~USD 3 to USD 40 million) for Large investments and from INR 10 crore to INR 100 crore (~ USD 1.3 to USD 13 million) for Normal investments. The cumulative sales target range from INR 450 to INR 6000 crore (~ USD 60 to USD 805 million) for Large investments and INR 180 to INR 1800 crore (~USD 24.1 to USD 41 million) for Normal investments.

The total duration of the scheme is from the year 2021-2022 to 2027-2028. Companies are required to make investments in the first five years 2021-22 to 2025-26, achieve sales targets between 2022-23 and 2026-27, and receive their incentives from 2023-24 until 2027-28.

 

*INR to USD as on 16 April 2021 - INR 74.51/USD

AFFECTED SECTORS

 
Inception date: 01 Apr 2024 | Removal date: 31 Mar 2026

Production subsidy

On 16 April 2021, the Indian Ministry of Commerce and Industry notified a Production Linked Incentive Scheme (PLI) for white goods (Air Conditioners and LED lights) manufacturers in India. The scheme will provide production-linked financial support for a period of 5 years to manufacturers of components of ACs and LED lights.

The scheme will extend a 4% to 6% incentive on incremental sales calculated over the base year (2019-2020). The incentive will reduce from 6% in the first year to 4% in the 5th year. The incentive for the years 2024-2025 and 2025-2026 will be 5%.

To be eligible for the scheme and disbursement of the incentive, entities have to meet minimum incremental investment & sales criteria.

In spite of the decrease in the incentive as compared to the previous years, this action has been marked by the GTA as harmful. The scheme, announced in April 2021, aims to provide production incentives over a period of 5 years. Prior to April 2021, there were no production incentives on these goods, and the 5% incentive for the year 2024-2026 is therefore harmful.

 

 
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Inception date: 01 Apr 2026 | Removal date: 31 Mar 2027

Production subsidy

On 16 April 2021, the Indian Ministry of Commerce and Industry notified a Production Linked Incentive Scheme (PLI) for white goods (Air Conditioners (ACs) and LED lights) manufacturers in India. The scheme will provide production-linked financial support for a period of 5 years to manufacturers of components of ACs and LED lights.

The scheme will extend a 4% to 6% incentive on incremental sales calculated over the base year (2019-2020). The incentive will reduce from 6% in the first year to 4% in the 5th year. The incentive for the year 2026-2027 will be 4%.

To be eligible for the scheme and disbursement of the incentive, entities have to meet minimum incremental investment & sales criteria.

In spite of the decrease in the incentive as compared to the previous years, this action has been marked by the GTA as harmful. The scheme, announced in April 2021, aims to provide production incentives over a period of 5 years. Prior to April 2021, there were no production incentives on these goods, and the 4% incentive for the year 2027-2027 is therefore harmful.

 

 
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