Budget 2024: Will Centre extend PLI to chemicals, battery manufacturing?

Finance Minister Nirmala Sitharaman's Interim Budget 2024-25 will most likely continue the tradition of making reforms to push the government's Atmanirbhar Bharat or Make in India campaigns with more expansion of its flagship schemes like the Production Linked Incentive (PLI).

The flagship PLI scheme of the Centre has already attracted over ₹1.03 lakh crore of investment till November 2023, according to the Ministry of Commerce and Industry data. Committed investments across 14 sectors where PLI schemes are operational exceed ₹3 lakh crore.

There are expectations that the government this time will allocate PLI incentives for battery manufacturers and other participants in the electric power manufacturing and storage segment.

"Announcements towards "renewable energy capital expenditure, including incentives for green initiatives and PLIs for module manufacturing, dynamic Feed-in-Tariffs, grid modernisation to integrate intermittent renewable energy, capital expenditure towards battery storage infrastructure, a reduction in customs duty on solar cells from 25% to 5%, and an extension of the ISTS waiver for renewable projects commissioned beyond June 2025, are some of the key expectations from the upcoming budget," Axis Securities says in its pre-budget expectations.

Also, say experts, the government’s further focus on harnessing India's manufacturing capabilities is expected to lead to a PLI benefit scheme, especially for the chemical sector. "Alternatively, there may be other tax incentives introduced in chemical manufacturing hubs like Gujarat, benefiting multiple Indian chemical manufacturers," the Axis report adds.

These initiatives, experts say, align with broader economic tailwinds, including India's demographic advantages, the country's capabilities in terms of quality and reliability, and the ongoing shift in manufacturing activities towards Euro+1 and China+1 strategies.

Another brokerage Sharekhan says the government could broaden the scope of PLI schemes to sectors such as chemicals and services. It experts: "Extension of timeline for PLI for existing industries such as pharma, capital goods, among others given that timeline in the automobile industry has already been extended."

So far, the government data shows the Centre's PLI schemes have led to the production of goods worth ₹8.61 lakh crore (including ₹3.2 lakh crore worth of exports) and a direct and indirect employment generation of over 6.78 lakh. The exports were led by sectors such as large-scale electronics manufacturing, pharmaceuticals, food processing, and telecom & networking products.

The biggest impact of the PLI scheme is seen in mobile phone manufacturing as PLI beneficiaries, which account for about 20% of the market share only, have contributed to about 82% of mobile phone exports during FY 2022-23. The sale of telecom & networking products by PLI beneficiary companies in FY 2023-24 increased by 370% vis-a-vis base year (FY 2019-20).

The government claims farmers and MSMEs have also benefited from the PLI scheme for food processing as the sourcing of raw materials from India has seen a significant increase.