The government’s PLI program for air conditioners is a huge boost for the industry, said Vikas Gupta, MD-Operations, PG Electroplast. PG Electroplast, a contract manufacturer of electronics, has applied for the Production Incentive Program (PLI) and pledged to invest Rs300 crore to manufacture air conditioner components.
Through its wholly owned subsidiary PG Technoplast, it has incurred a capital expenditure (capex) of Rs 300 crore over the next five years for the manufacture of air conditioner (AC) components.
Excerpts from an email interview
How do you think the PLI program will help support the Indian government’s Make in India initiative?
The recent geopolitical situation, due to the US-China trade war and the COVID-19 pandemic and accompanying supply chain disruptions, has created a tremendous opportunity. In an attempt to reduce the risks to their supply chains, many global companies have had to look to locate their manufacturing bases elsewhere. India is increasingly gaining 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 durable consumer goods are discouraged, with increasing restrictions on foreign products and an increase in basic tariffs. India’s electronics manufacturing sector is currently not on par with competing global nations as it faces a “handicap” of around 8-11% due to gaps in the country’s infrastructure, the logistics framework and national supply chain, high financial costs, insufficient training in required skills and lack of focus on R&D.
The production-linked white goods incentive program introduced by the government provides significant financial incentives to boost domestic manufacturing and attract significant investment in the white goods manufacturing value chain. The program has the potential to boost domestic electronics manufacturing in India and make the country competitive globally. The program involves a 4 to 6 percent incentive on additional sales of products manufactured (during the base year) in target segments, to eligible companies, for five years after the base year. In an industry with very thin margins, this pattern is a clear game-changer. Creating an ecosystem of components is a journey, but with the PLI scheme, this process will be greatly accelerated.
I am sure that in the next 3-4 years we will have a large component ecosystem in the country for manufacturing finished products, where import intensity is relatively higher today. The program also encourages R&D and the development of core skills and capabilities that 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. Government goals and PG goals are completely aligned – to build a robust component ecosystem in the nation and to achieve economies of scale by meeting domestic demand. After achieving competitiveness vis-à-vis global players, start exporting, helping India to become a hub for global manufacturing.
How does PG prepare to meet the criteria of the LIP?
PG meets all the prequalification criteria defined in the diagram. We have already launched the first phase of capital spending and will contribute to the growth of the component ecosystem in the country. We also invest in our design and R&D capabilities to ensure that the progress we make is sustainable and that we can compete with global players in the future.
What are the planned investments? How will the funds be mobilized?
PG is using funds from its recent fundraising and internal regularizations. PG’s PLI project has reached financial close and is on track to meet its projections and commitments.
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Posted on: Saturday October 09, 2021 19:39 IST