Review of Domestic Value Addition (DVA) Violations under PLI Schemes
A high-level government panel led by the Cabinet Secretary has mandated ministries and departments to examine breaches in Domestic Value Addition (DVA) requirements under production-linked incentive (PLI) schemes.
Objective
- Collate details from various departments to prepare a consolidated report for the Department for Promotion of Industry and Internal Trade (DPIIT).
Background of PLI Schemes
- Launched more than five years ago, across 14 key strategic sectors.
- Aim to transform India into a manufacturing hub by:
- Attracting investment.
- Reducing import dependency.
- Enhancing export competitiveness.
- Incentives are contingent on fulfilling criteria such as incremental sales, minimum investment, and DVA norms.
Challenges in Meeting DVA Requirements
- Many companies struggle to meet stringent DVA benchmarks.
- Advanced Chemical Cell (ACC) scheme faces difficulties as essential minerals are not domestically available, making the 60% DVA requirement impractical.
- In mobile phones and electronics, achieving higher DVA requires localizing critical parts like printed circuit boards and memory chips.
Additional Constraints
- Limited intellectual property ownership among Indian firms in core design and capital goods.
- Low DVA percentages in some sectors, such as telecom equipment.
Expert Opinion
- Trade economist Biswajit Dhar cautions that target-setting may replicate the restrictive "licence-control" regime.
- He advocates for policies promoting innovation and organically increasing DVA rather than compliance-heavy systems.
