The government's PLI scheme for airconditioners is a huge shot in the arm for the sector, said, Vikas Gupta, MD-Operations, PG Electroplast. PG Electroplast, a contract manufacturer of electronic goods, has applied for the production-linked incentive (PLI) scheme and committed to investing Rs 300 crore to manufacture air conditioner components.
Through its wholly-owned subsidiary PG Technoplast, it has committed a capital expenditure (capex) of Rs 300 crore over the next five years for manufacturing air conditioner (AC) components.
Excerpts from an email interview
How do you think will the PLI scheme help in supporting Make in India Initiative of Indian Government?
The recent geopolitical situation, owing to the US-China trade-war and the COVID-19 pandemic and its accompanying supply chain disruptions, has created a tremendous opportunity. In attempts to de-risk their supply chains, many global companies have had to look to set up their manufacturing bases elsewhere. India is increasingly winning the China+1 opportunity. This is due to a variety of factors, but two of the most important are a large untapped domestic market, and a clear government focus on Make in India.
Imports of consumer durables are being discouraged, with increasing restrictions on foreign goods and rise in basic customs duties. India’s electronics manufacturing sector is currently not at par with the competing global nations, as it faces a ‘disability’ of around 8-11 percent due to gaps in the nation’s infrastructure, logistics framework and domestic supply chain, high finance costs, insufficient training in required skills and lack of focus on R&D.
The Production Linked Incentive Scheme for White Goods introduced by the government is providing significant financial incentives to boost domestic manufacturing and attract large investments in the White Goods manufacturing value chain. The scheme has the potential to boost the domestic manufacturing of electronics in India and make the country globally competitive. The scheme entails an incentive of 4-6 percent on incremental sales of goods manufactured (over the base year) under target segments, to eligible companies, for five years after the base year. In an industry with razor thin margins, this scheme is a clear gamechanger.The creation of a components ecosystem is a journey, but with the PLI scheme, that process will get fast tracked substantially.
I am sure that in the next 3-4 years, we will have a large component ecosystem in the country for the manufacturing of finished goods, where the import intensity is relatively higher today. The scheme is also incentivizing R&D and the development of core competencies and capabilities which will help the industry become sustainable and globally competitive in the long term
What is PG Electroplast's long-term vision?
PG was founded in 1977 by my father, Promod Gupta. He had a vision for manufacturing in India. The government’s goals and PG’s goals are completely aligned- to set up a robust components ecosystem in the nation and to achieve economies of scale by catering to the domestic demand. After achieving competitiveness vis a vis the global players, start exporting, helping India become a hub for global manufacturing.
How is PG gearing up to meet PLI criteria?
PG meets all prequalification criteria defined in the scheme. We have already kicked off the first phase of the capital expenditure, and will contribute to growing the components ecosystem in the nation. We are also investing in our design and R&D capabilities to ensure that the progress we make is sustainable and such that we can compete with global players going forwards.
What is the capex planned? How will be the funds mobilized?
PG is utilizing funds from its recent fundraise and internal accruals. PG’s PLI project has achieved financial closure and is on track to deliver its projections and commitments.