The Union Cabinet on Wednesday approved the modified production-linked incentive (PLI) scheme for information technology (IT) hardware to boost local manufacturing of products like tablets and laptops, and more than doubled its budgetary outlay to Rs 17,000 crore from the previous provision of Rs 7,325 crore.
The revised scheme may offer incentives of up to 9 per cent on the incremental sales of tablets, laptops, all-in-one personal computers, servers, and edge computing devices manufactured in the country to attract investment in the sector. The tenure of the scheme has been extended to six years from four years announced in 2021.
The scheme received a lukewarm response from the industry in the past, mainly due to lower incentives and a slump in demand after a boom during the Covid-19 pandemic. Only two of the 14 firms that applied for benefits under the scheme’s earlier version could meet their targets in the first year.
The government now aims to bring flexibility to the scheme by allowing the original equipment manufacturers (OEMs) to apply for incentives under the scheme anytime in the next three years. The base year for comparing incremental sales will be 2022-23, a government official said.
The government has also introduced a new category of hybrid manufacturers, considering the diversified global supply chains. The scheme’s budget, therefore, will be divided among the three categories — domestic, global, and hybrid. It will also have additional incentives for the localisation of certain optional items.
The maximum incentive for global companies will be capped at Rs 4,500 crore, while players who fall under the 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 hybrid, and nine from domestic.
Sunil Vachani, managing director at multinational electronics manufacturing services major Dixon Technologies, said: “We like the hybrid Indian category. We are planning to invest Rs 300 crore in six years and will expand from laptops and 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 5 per cent, up from the 2 per cent offered earlier. The companies assembling devices with certain locally manufactured components may get additional incentives under the revised scheme. The companies assembling hardware with locally produced processors may get an incentive of 3 per cent of incremental sales. In aggregate, the incentives could be 8-9 per cent.
“We received feedback from the industry and have modified the earlier scheme accordingly to make sure that we can attract companies to India, incentivise local production, and that Indian companies can grow systematically. In the future, Indian brands in design and manufacturing should develop,” said Ashwini Vaishnaw, minister for communications, electronics and IT.
According to the government’s estimates, the new scheme is likely to generate 75,000 direct jobs. Vaishnaw said the indirect job creation might be three times the direct jobs, implying the total job creation of about 300,000. The minister said electronics manufacturing in India was growing at a CAGR of 17 per cent for the last eight years and had 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 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 OEMs that incorporate Indian-designed IP into their systems and their products,” said Rajeev Chandrasekhar, minister of state (MoS) for electronics and IT.
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