Sustainable manufacturing: How PLI schemes can become a tool for green investments

The Government’s thrust for ‘Make in India’ has been evident through the construct of Production Linked Incentive (PLI) schemes rolled out over the last couple of years. These PLI schemes spanning across sectors have been well received by the industry. In these times of high operational and capex costs, support from the Government in the form of incentives indeed provides the requisite push for culminating investment plans into reality.

PLI schemes encourage new investments leading to higher turnover for businesses and higher utilisation of manpower. However, these schemes also bring along an opportunity to push the envelope for India’s sustainability goals. India has committed to being net zero by 2070 for which the amount of groundwork required is enormous. Several measures have been taken by the Government in this regard by extending benefits/ concessions for green investments (e.g., renewable energy, effluent treatment plant etc.) The Government should ensure that the infrastructure that is now developed in the country is aligned with its sustainability goals as well. Even the industry is inclined to adopt green practices owing to investor and customer preferences and requirements.

For encouraging green investments in the country, all new PLI schemes could potentially carry additional incentives for investment in green technologies leading to higher utilisation of raw materials and reduction in waste discharged in the manufacturing process. Additionally, products made from recycled raw materials and recycling of waste generated during the manufacturing process can be separately incentivised. As these policies are laid out for each sector specifically, incentives for research and development for green technologies for the respective sectors could be incentivised as well.

Investments in the previously announced PLIs are still underway and there could be room to still create more sustainable infrastructure in those sectors. In fact, the Government could consider releasing a corrigendum to the previously announced PLI schemes and introduce additional incentives for green investments subject to thresholds. This would mean creating an additional budget outlay for PLI schemes and specific allocation for green incentives could be an option worth exploring in the upcoming Union Budget.

Discussions with the relevant industry stakeholders and forums before formulating the structure for such incentives would be vital for making it successful. These additional incentives under PLI schemes could be linked to certain thresholds of reducing carbon emissions for which certification requirements can be built in. Authorised agencies for computing carbon footprint could play a larger role here. Overall, this would also help in expanding the outreach of Business Responsibility and Sustainability Reporting (BRSR) over the next few years to unlisted entities as well while improving compliance for listed companies. Such moves would only fortify India’s positioning and commitment towards sustainability at a global level. In certain cases, these incentives may help overcome prohibitive costs for considering green investments.

Based on global experiences, India would need to adopt a structured combination of green taxes and incentives. Levy of any green taxes in the near future alone is unlikely to generate enough revenues for resolving climate concerns for India. Hence, incentivising green behaviour is an essential element in the sustainability journey for the country. India is not alien to this concept and state industrial policies are a classic example wherein incentives are rolled out aiding the development of sustainable infrastructure for the country. The need of the hour is to now understand the learnings from previous experiences of incentivising green investments and develop appropriate mechanisms under the PLI structure to make it more effective. The industry would also embrace these sustainability-linked incentives and hopefully, it would create a win-win situation for the Government as well as the industry.

Roy is Partner & Leader (North) – Indirect Tax and Tandon is Partner – Indirect Tax, BDO India.

ETRise MSME Day 2022 Mega Conclave with Industry Leaders. Watch Now.

Source link

Spread the word!

Leave a Comment

Your email address will not be published. Required fields are marked *