On Wednesday, the Narenda Modi-led government announced Rs 2-lakh crore PLI (production-linked incentives) for 10 more sectors to give fillip to the domestic manufacturing, exports and job creation. The scheme covers a wide variety of sectors, including, white goods manufacturing, pharmaceutical, specialised steel, auto, telecom, textile, food products, solar photovoltaic and cell battery.
"The government's move to allocate a cumulative Rs 17,190 crore through PLI scheme on telecoms, networks, electronics and technology products will go a long way in promoting ecosystem play for value addition. The cascading impact is set to create efficiencies, generate employment and enhance India's contribution to the global value chain," said Prashant Singhal, Emerging Markets TMT Leader, EY, in a statement.
This was a long-pending demand of the sector, and the telecom ministry had even consulted the telecom gear makers a few months ago. The scheme has come at a time when India is trying out ways to become self-reliant in the telecom equipment space. A host of companies, including Mukesh Ambani-run Reliance Jio, has developed 5G/4G solutions for domestic and global markets. It's believed that the guidelines of the scheme (for telecom) are yet to be finalised.
"This is just a formal announcement. We don't know when it will be notified. The government has been using PLI as genie to push its Aatmanirbhar Bharat scheme," says a telecom sector veteran. In April, the Ministry of Electronics and IT introduced a PLI scheme for mobile and semiconductor manufacturing segments. Industry experts say that just a few companies (Foxconn, Wistron, Pegatron, and some others) who have applied for the April PLI scheme would likely corner a lion's share of the scheme's corpus (Rs 50,000 crore). A similar situation is likely in the telecom equipment space where big players like Jio would likely benefit a lot from the just-launched PLI scheme.
Large telecom gear makers like Ericsson, Nokia and Huawei already have manufacturing facilities in India, and in the absence of finer details of the latest scheme, it's not clear whether the scheme would cover them or not.
Recently, brokerage UBS had estimated that Jio's self-built 5G solutions could bring down network rollout cost by 10-15 per cent as compared to legacy networks, and open up $10 billion export opportunities for the telco. The PLI scheme would further bring down the costs of production of telecom gears in the country.
"This will surely fuel the shift away from global vendors given that India already has an ecosystem of equipment makers who are betting on the next-generation of telecom networks to be built on open architecture. The PLI would bring down their overall costs so that they can compete globally," says a telecom expert.