Finance Ministry Pushes for Higher Local Sourcing in Incentive Schemes

The Finance Ministry has asked ministries to include domestic manufacturing and procurement conditions while preparing new subsidy and incentive schemes for expenditure approval, as per the news reports. 

Departments have been directed to specify local value addition, domestic sourcing and manufacturing-linked conditions in scheme proposals submitted to the Expenditure Finance Committee.  

Proposals without these details are being returned for revision. 

Government Reviews Import Dependence 

This comes as the Centre examines whether government incentives are supporting domestic manufacturing capacity or increasing dependence on imports in key sectors. 

The issue was discussed during recent meetings held after supply chain disruptions linked to geopolitical tensions in West Asia.  

Officials said ministries were asked to assess whether schemes could be structured to support local production and reduce external dependence in areas where manufacturing is possible within the country. 

Checks Introduced at Approval Stage 

The latest direction increases scrutiny at the approval stage itself. Earlier, localisation requirements were often handled during implementation after schemes had already been approved. 

Under the revised process, ministries are being asked to define sourcing and manufacturing conditions while drafting the scheme framework.  

Departments may also need to justify continued import dependence in sectors where domestic capacity exists or can be expanded. The finance ministry is to issue formal guidelines on the matter. 

Incentive Disbursement Continues to Rise 

Government spending under manufacturing-linked incentive schemes has increased steadily over recent years. Data presented in Parliament showed incentive disbursement stood at ₹2,968 crore in 2022-23. 

The figure rose to ₹6,753 crore in 2023-24 and further increased to ₹10,114 crore in 2024-25. Till September 2025, disbursement for 2025-26 stood at ₹4,110 crore. Total payouts during the period reached ₹23,945 crore. 

Sectors Likely to be Covered 

The exercise is to cover sectors such as electronics, automobiles, mobility, clean energy, heavy industry and advanced technology manufacturing, where fiscal support has expanded in recent years. 

Existing programmes, including Make in India, the Public Procurement Order, 2017, and production-linked incentive schemes already encourage domestic sourcing and local manufacturing through procurement and value-addition norms. 

Read More: Government Revises PM-WANI Public Wi-Fi Rules; QR Login and Short-Term Internet Plans Introduced! 

Conclusion  

The proposed changes are for linking government incentive spending more closely with domestic manufacturing goals. Ministries may now face stricter scrutiny over import dependence while designing subsidy schemes. 

For daily market updates and regular stock market news in Hindi, stay tuned to Angel One's share market news in Hindi. 

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.   
 
Investments in the securities market are subject to market risks, read all the related documents carefully before investing.