India announced production-linked-incentive (PLI) scheme on November 11 directed towards 10 ‘champion’ sectors which have potential to grow and have a presence in the global market or have a high import dependency. Davis Index spoke to the various market participants to know how the PLI scheme would benefit them.
The PLI scheme is worth Rs1.45trillion ($19.51bn) which would drive domestic manufacturing, create economies of scale and increase exports.
Amongst the 10 sectors, production of automobile & component sector, telecom sector and specialty steel are in limelight which could boost demand for most metals. A significant amount of the incentives is directed to auto sector with the highest outlay of Rs570mn, with auto and component production being a major consumer of metals. Steel, stainless steel, zinc, aluminium and copper are all used in production of auto vehicles while lead is significantly used for lead batteries.
Anand Mahindra, Chairman Mahindra Group, welcomed the scheme, terming it a ‘game changer’ on Twitter. “The dramatic shift the scheme signals in the attitude towards the industry is more important than the mechanics of the scheme,” he tweeted.
However, market participants believe this scheme would not have any immediate effect on any market, but the effect would gradually play out and can only be seen in the long term. Fitch Solutions said the PLI scheme will be rewarding the auto sector over 2020-2025.
Any push in the market is good, said a spokesperson from Gravita India, who said this scheme was proposed at MRAI and acceptance was received by the industry a couple of months back, which has now been announced by the government.
Lead market will eventually reap the benefits of the scheme as two of its main consuming sectors, telecom and auto sector are being heavily incentivized.
Steel Minister Dharmendra Pradhan said that the PLI will instill new zeal in the domestic market and boost competitiveness adding strength to the economy and is a massive push towards Make in India.
PLI scheme proposed by NITI Ayog for steel sector is aimed to reduce dependency on imports and foster creation of global champions in steel production and elevate exports.
The PLI scheme is laid out to benefit the 10 sectors including automobile and auto components, steel, telecom sector, white goods, electronics, textiles, pharmaceuticals, solar PV modules, advanced cell chemistry battery and food products.