PLI scheme for construction equipment likely to attract US$4 billion of domestic and foreign investments in near term, states ICEMA

India's construction equipment (CE) industry which aims to achieve a US$ 25 billion target by 2030 believes that the Production Linked Incentives (PLI) scheme if granted, may attract nearly US$ 4 billion of domestic and foreign investment in the near term. It is also likely to lead to about US$ 3 billion in exports from the country, apart from saving US$ 2.9 billion in forex savings by 2030 through import substitutions, as per the Indian Construction Equipment Manufacturers Association (ICEMA), an industry lobby. The PLI is also expected to create employment opportunities for nearly 3.2 million people.

Input from original equipment manufacturers (OEMs) and other industry stakeholders have helped prepare these estimates, which have been shared with the Ministry of Heavy Industries, NITI Aayog, and the Ministry of Road Transport and Highways, according to ICEMA. The Ministry of Heavy Industries has requested ICEMA to fortify the proposal with details including product coverage and an implementation plan, among other things. As per ICEMA, the proposal has been updated and is expected to be presented to the ministry soon. The proposal outlines eligibility criteria, minimum new domestic investment requirements, incentive slabs for consideration, proposed incentive outlay, and the portfolio coverage of equipment and components investments.

ICEMA is the apex association for construction equipment manufacturers in India and represents over 90 leading companies that manufacture, trade, and finance a wide range of construction, earthmoving, concrete, mining, and material handling equipment. The CE industry stakeholders opine that to meet the emerging demand, the industry needs to increase capacity as well as reduce its dependence to become self-reliant. “Given the capital-intensive nature of the industry and to help it contribute effectively towards the infrastructure development plans of the country, it is imperative for the government to consider extending a PLI scheme for the sector,” the lobby said in its communication.

According to ICEMA's Vision Plan 2030, the Indian construction equipment industry will triple its sales volume over the next ten years, reaching US$ 25 billion in revenue, with the help of the government's implementation of the Rs 111 trillion National Infrastructure Pipeline (NIP) in six years through FY25.  

In Budget 2023–24, capital investment outlay for infrastructure is being increased by 33% to Rs 10 lakh crore (US$ 122 billion), which would be 3.3% of the GDP. Starting with 6,835 projects, the NIP project count now stands at 9,142, covering 34 sub-sectors, as per news reports. Under the initiative, 2476 projects are in the development phase, with an estimated investment of US$ 1.9 trillion. Nearly half of the under-development projects are in the transportation sector, and 3,906 are in the roads and bridges sub-sector, the government data suggests.

However, even though the PLI scheme has been launched for various sectors, it has yet to take off in a big way. PLI incentive disbursements may be just Rs 1,500 crore at the most in FY23 as opposed to the target of Rs 4,000 crore as the majority of major sectors, including steel, battery cells, and automobiles, are taking longer to implement the schemes. Media reports suggest that by 2030, the utilisation of the Rs 1,97,000 crore in incentives for all PLIs would, in the best-case scenario, be below Rs 1,50,000 crore.