The Union Cabinet on Wednesday approved the modified Production Linked Incentive (PLI) Scheme for IT Hardware with more than doubling budgetary outlay to Rs 17,000 crore compared to the previous provision of Rs 7,325 crore.
The revised scheme may offer incentives of up to nine per cent on the incremental sales of laptops, tablets, all-in-one PCs, servers and edge computing devices manufactured in the country to attract investments in the sector. The tenure of the scheme is extended to six years from four years announced in 2021.
The scheme, first announced in 2021, had had a tepid response from the industry mainly due to lower incentives and a slump in demand after a boom during the pandemic. Only two of the 14 firms that applied for benefits under the scheme could meet the targets required to apply for the scheme in the first year.
The Centre now aims to make the scheme more flexible by allowing original equipment manufacturers (OEMs) to apply for incentives in the scheme anytime in the next three years. The base year for comparing incremental sales will be 2022-23. Companies will also be able to apply anytime in the next three years, giving them room to choose their base year, a government official said.
The government has also introduced a new category of hybrid manufacturers, considering the diversified global supply chains. The budget will therefore be split into three categories of domestic, global, and hybrid. It will also have additional incentives for the localisation of certain optional items.
The cap on maximum incentive for global companies will be Rs 4,500 crore, while for those who fall under hybrid category may get a maximum incentive of Rs 2,250 crore. For domestic companies, there will be a cap of Rs 500 crore. According to the government’s presentation to the industry stakeholders, the number of eligible beneficiaries will be two from the global category, five from the hybrid and nine from the domestic category.
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Sunil Vachani, managing director (MD) at multinational electronics manufacturing services major Dixon Technologies, said: “We like the hybrid Indian category (prescribed in the new scheme). We are planning to invest Rs 300 crore in the next six years and will expand from laptops, tablets to include desktops and servers. We will of course have to look at global contracts.”
The average incentive over six years will be about five per cent, up from two per cent offered earlier. Companies that assemble devices with certain locally manufactured components may get additional incentives. Those assembling hardware with locally made processors may get incentives of three per cent of incremental sales. In aggregate, the incentives may sum up to 8-9 per cent.
“We received feedback from the industry and have modified the earlier scheme accordingly to make sure we can attract companies to India, incentivise local production, and that Indian companies can grow systematically. In future, Indian brands in design and manufacturing should develop,” the Union Minister of Communications, Electronics and Information Technology Vaishnaw said.
According to the government’s estimates, the new scheme is likely to generate 75,000 direct jobs. Vaishnaw said indirect job creation may be thrice the direct jobs and could reach around 200,000 people. The minister said electronics manufacturing in India is growing at a CAGR of 17 per cent for the last eight years and has crossed a benchmark of $105 billion in production value.
The Centre is expecting an investment of over Rs 2,430 crore in this sector over the period. However, this is slightly lower than the initial expectation of Rs 2,500 despite the additional incentives. The expected incremental production value under the scheme is pegged at Rs 3.35 trillion during its tenure.
“The PLI 2.0 scheme for the IT hardware sector aims to boost domestic manufacturing and attract large investments and jobs over the coming years. It will create additional incentives for companies to invest/set up their manufacturing base in India and also the original equipment manufacturers (OEMs) that incorporate Indian-designed IP into their systems and their products,” said Rajeev Chandrasekhar, minister of State (MoS) for Electronics and Information Technology.
With inputs from Surajeet Das Gupta
