Energy Diversification, Small Modular Reactors And PLI Scheme: Explained

Source: Indian Express
GS III: Indian Economy, Industrial Growth, Infrastructure

Overview

1. News in Brief
2.  Key Highlights
3. Way Forward

Why in the News?

The President of the Confederation of Indian Industry (CII) called for continuing the PLI Scheme, diversifying energy sources, securing critical minerals, and advancing reforms to strengthen India’s manufacturing resilience after the West Asia conflict.

News in Brief

• The West Asia conflict disrupted global energy markets and supply chains, highlighting India’s dependence on imported crude oil, natural gas, fertilisers, and critical minerals.
• The crisis underscored the need to strengthen India’s resource mobilisation and reduce vulnerabilities arising from import dependence.
• India should accelerate domestic exploration of oil, gas, and minerals while diversifying import sources to build resilient supply chains and enhance economic security.

Key Highlights

PLI Scheme Must Continue to Strengthen Manufacturing

• The Production Linked Incentive (PLI) Scheme has significantly contributed to India’s manufacturing sector by attracting investments, creating employment, boosting exports, and increasing tax revenues.
• Rather than discontinuing the scheme, the government should modify it wherever necessary to improve sectoral performance.
• Future PLIs should prioritize:
  • Export-oriented industries.
  • Import-intensive sectors.
  • High-value manufacturing.
  • Chemicals used for Active Pharmaceutical Ingredients (APIs) to reduce dependence on imports.
• The PLI scheme also helps India integrate into Global Value Chains (GVCs) while supporting the vision of Atmanirbhar Bharat.

MSMEs are Central to Supply Chain Resilience

• India’s MSMEs play a critical role in employment generation and industrial production.
• MSMEs should become globally competitive through better technology, finance, and infrastructure support so thet they can participate effectively in domestic and global supply chains.
• A strong MSME ecosystem will reduce dependence on imports while improving manufacturing competitiveness.

Energy Diversification is Essential for Energy Security

• India should build a diversified energy portfolio comprising:
  • Solar energy
  • Wind energy
  • Biomass
  • Biofuels
  • Hydropower
  • Nuclear energy
  • Tidal energy
  • Green Hydrogen
• It will ensure reliable, affordable, and clean energy while reducing import dependence and enhancing climate commitments.

Small Modular Reactors (SMRs): The Future of Nuclear Energy

• With many countries investing in SMRs, India should strengthen indigenous capabilities in reactor design, manufacturing, and innovation.

Strengthening the Entire Manufacturing Value Chain

• Industrial growth cannot be achieved through downstream manufacturing alone.
• India must simultaneously strengthen:
  • Upstream industries (raw materials and intermediate goods)
  • Component manufacturing
  • Domestic supply chains
  • Testing, Maintenance, Repair and Overhaul (MRO) ecosystem
• The evolution of India’s electronics sector from assembly to component manufacturing is an example of value-chain development that should be replicated in sectors like aerospace, defence, and chemicals.

Way Forward

• Continue and refine the PLI Scheme with greater focus on domestic value addition and export competitiveness.
• Strengthen MSMEs and build resilient supply chains for energy, critical minerals, and manufacturing.
• Diversify the energy mix by expanding renewable energy, nuclear power, and promoting Small Modular Reactors (SMRs).
• Undertake structural reforms in ease of doing business, land, labour, logistics, taxation, technology, and innovation to improve the investment climate.
• Accelerate trade agreements and integration into Global Value Chains (GVCs) while safeguarding India’s strategic and economic interests.

UPSC Value Addition

Production Linked Incentive (PLI) Scheme

• Launched in 2020 under the Atmanirbhar Bharat Abhiyan.
• Aims to boost domestic manufacturing and make India a global manufacturing hub by offering financial incentives linked to incremental production.
• Objectives
  • Promote domestic manufacturing.
  • Attract domestic and foreign investments.
  • Increase exports.
  • Generate employment opportunities.
  • Reduce import dependence.
  • Integrate India into Global Value Chains (GVCs).
• Key Features
  • Incentives are provided based on incremental production/sales over a defined base year.
  • Covers 14 strategic sectors.
  • Encourages technology adoption and value addition in manufacturing.
• Major Sectors Covered
  • Electronics and mobile manufacturing, pharmaceuticals, medical devices, telecom and networking products, automobiles and auto components, food processing, textiles, specialty steel, white goods (air conditioners and LED lights), high-efficiency solar PV modules, drones and drone components, and Advanced Chemistry Cell (ACC) batteries.
• Achievements
  • Attracted significant domestic and foreign investments.
  • Boosted electronics and mobile phone exports.
  • Created employment across manufacturing sectors.
  • Increased domestic production capacity.
  • Enhanced tax revenues and industrial output.
• Challenges
  • Low domestic value addition in some sectors.
  • Continued dependence on imported raw materials and components.
  • Uneven performance across different PLI sectors.
  • Infrastructure and logistics bottlenecks.
  • Limited participation of MSMEs in supply chains.
• Significance for India
  • Strengthens the Make in India initiative.
  • Promotes Atmanirbhar Bharat by reducing import dependence.
  • Enhances India’s competitiveness in global manufacturing.
  • Improves export potential and foreign exchange earnings.
  • Supports long-term industrial growth and economic resilience.

Energy Security

• Four Pillars
  • Availability: Adequate supply of energy resources.
  • Accessibility: Reliable access to energy for all consumers.
  • Affordability: Energy at reasonable and stable prices.
  • Sustainability: Environmentally sustainable and clean energy sources.
• Key Challenges
  • High dependence on imported crude oil and natural gas.
  • Reliance on imported critical minerals for clean energy technologies.
  • Geopolitical conflicts affecting global energy supplies.
  • Rising electricity demand due to economic growth.
  • Balancing energy needs with climate change commitments.
• Major Government Initiatives
  • National Green Hydrogen Mission.
  • PM-KUSUM.
  • National Solar Mission.
  • Strategic Petroleum Reserves.
  • Biofuel Policy.
  • Nuclear Energy Expansion.

Critical Minerals

• What are Critical Minerals?
  • Critical minerals are minerals essential for strategic industries, clean energy technologies, and national security, with limited domestic availability or supply risks.
• Importance
  • They are indispensable for electric vehicles (EVs), battery manufacturing, renewable energy, semiconductors, defence equipment, aerospace, electronics, and advanced manufacturing.
• Major Critical Minerals
  • Lithium, cobalt, nickel, copper, graphite, and rare earth elements (REEs).
• Government Measures
  • National Critical Mineral Mission, auction of critical mineral blocks, overseas acquisition of mineral assets, and international cooperation through the Mineral Security Partnership (MSP).

Key Takeaways

UPSC Prelims Practice Question

Consider the following statements regarding the Production Linked Incentive (PLI) Scheme:

1. 1. It aims to enhance domestic manufacturing and reduce import dependence.
   2. Incentives are linked to incremental production or sales by eligible firms.
   3. The scheme is currently limited to the electronics and pharmaceutical sectors only.

Which of the statements given above is/are correct?

a) 1 and 2 only
b) 2 and 3 only
c) 1 and 3 only
d) 1, 2 and 3

Answer: a) 1 and 2 only

Daily Current Affairs: Click Here

Rate this Article and Leave Feedback