GTRI cautions govt against misuse of fiscal incentives under PLI scheme

New Delhi, June 15 (KNN) The Global Trade Research Initiative (GTRI) in its report has cautioned the government about the possible misuse of the fiscal incentives granted under the PLI scheme.

GTRI on Wednesday said that government should consider simplifying the criteria for grant of fiscal incentives under the PLI scheme while guarding against possible misuse of those support measures by the industry.

The PLI scheme has been rolled out by the government for 14 sectors, including telecommunications, electronics, white goods and pharma with an outlay of Rs 1.97 lakh crore.

Cautioning the government about the possible misuse of the incentives in its report, the think-tank said that the firms may easily manipulate production levels through their supporting manufacturers, group companies or contract manufacturers.

Citing an example, the report said the government had to suffer huge revenue loss in the past due to the misuse of a 'Target Plus' scheme during 2003-06.

GTRI Co-founder Ajay Srivastava said,"Departments implementing PLI schemes may study the Target Plus scheme misuse and be vigilant. The risk compounds when incentive is granted on quarterly production.”

On simplifying the criteria for grant of PLI incentive, he said the criteria for various sectors include thresholds on investments, production, sales, degree of localization, inputs used and many more and manufacturers may not be able to tick all the boxes.

"In most cases, it is difficult to ascertain the actual value of a product or invoice. Doing this makes incentives subjective and delay the settlement of claims. Guidelines should be few and transparent," the report said.

It added that the best way to simplify the scheme is to incentivise local production of components and not the final product.

GTRI further suggested that extending incentives under the scheme for clean energy technology would help in greater ways in promoting domestic manufacturing.

"Given the upcoming carbon border taxes imposed by the EU and soon by other countries, India must invest in clean energy technologies. Many countries are investing in making industrial processes cleaner and greener," it added.

The report pointed out that industrial labs for reverse engineering should be encouraged to reduce the dependence on imported machinery and enhance production quality.

This initiative would allow India to replicate advanced machinery used in textiles, mining, metal work, and agriculture sectors.  (KNN Bureau)