The 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, a report by think-tank GTRI said on Wednesday.
The government has rolled out Production Linked Incentive (PLI) scheme 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, the Global Trade Research Initiative (GTRI) said 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.
“Departments implementing PLI schemes may study the Target Plus scheme misuse and be vigilant. The risk compounds when incentive is granted on quarterly production,” GTRI Co-founder Ajay Srivastava said.
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.