After the success of Production Linked Incentive Scheme in bringing investments in mobile phone (handsets and components) manufacturing, the Union Cabinet chaired by the Prime Minister, Shri Narendra Modi has approved the Production Linked Incentive (PLI) Scheme forIT hardware products.The target IT hardware segments under the proposed Scheme include Laptops, Tablets, All-in-One Personal Computers (PCs) and Servers.
The scheme proposes production linked incentive to boost domestic manufacturing and attract large investments in the value chain of these IT Hardware products.
PLI scheme for Mobile Phones and Specified Electronic Components was launched las year during the middle of pandemic to establish India as a hub of electronic manufacturing. It has been a huge success in terms of interest received from Global as well as Domestic Mobile Manufacturing companies. 16 companies were approved under the first round of the PLI Scheme for Large Scale Manufacturing of Mobile Phones and Specified Electronic Components.
The scheme was announced in April, 2020; last date for application was 31st July, 2020 and the scheme commenced on 01.08.2020. All this happened during the most challenging times of COVID19, when the economy and manufacturing was under severe stress. In the last 5 months of scheme operation and despite challenging times, the applicant companies, including top global mobile phone companies, have produced goods worth ~INR 35,000 crore and invested ~INR 1,300 crore under the Scheme. Additional employment generation during this period stands at around 22,000 jobs. Another scheme for promoting manufacturing of electronics components called SPECS has also received 22 applications involving investment of about INR 13,500 crore in the areas of active, passive and electromechanical components; displays and mechanics for mobile phones.
Based on initial success of the PLI Scheme for Mobile Phones and Specified Electronic Components, 10 target sectors along with specific product lines having high growth potential were identified by NITI Aayog for implementation of PLI Schemes. PLI Scheme for IT Hardware is a further step in that direction. It comes in close wake of Production Linked Incentive (PLI) Scheme for Telecom and Networking Products that was approved by Union Cabinet last week.
The total cost of the PLI Scheme for IT Hardware is approximately INR 7,350 crore (Rupees Seven Thousand Three Hundred Fifty Crore Only) over 4 years.
The Scheme shall extend incentives between4% to1%on net incremental sales (over base year i.e. 2019-20) of goods manufactured in India and covered under the target segment, to eligible companies, for a period of four (4) years.
The proposed scheme is likely to benefit major global as well as domestic manufacturers of IT hardware products namely Laptops, Tablets, All-in-One PCs, and Servers. This is an important segment to promote manufacturing as there is huge import reliance for these items at present.
PLI Scheme is conceived in a manner that incentives are payable by government only after investment has been done, employment has been generated, production and sales targets have been met.
Benefits:
The scheme will enhance the development of electronics ecosystem in the country. India will be well positioned as a global hub for Electronics System Design and Manufacturing (ESDM) on account of integration with global value chains, thereby becoming a destination for IT hardware exports.
- Over the next 4 years, the Scheme is expected to lead to total production of upto INR 3,26,000 crore (INR 3.26 lakh crore) by these 5 Global Champions and 10 National Champions.
- It is equally heartening to note that the scheme is also expected to boost exports significantly. Out of the total production in the next 4 years, more than 75% are expected to be exports of the order of INR 2,45,000 crore.
- The Scheme will bring an additional investment in electronics manufacturing to the tune of INR 2,700 crore.
- The direct and indirect revenues generated from production under this scheme are expected to be INR 15,760 crore over next 4 years.
- Domestic value addition for IT Hardware is expected to rise to 20% – 25% by 2025 from the current 5% – 10% due to the impetus provided by the Scheme. Increase in both domestic manufacturing and domestic value addition will help significantly reduce the large foreign exchange outgo that India will have to otherwise bear.
- It is expected that the scheme would lead to large scale electronics manufacturing in the country and open tremendous employment opportunities. The scheme has a potential to generate over 1,80,000 jobs (direct and indirect) over 4 years.
- The scheme will promote large scale electronics manufacturing of IT Hardware products and contribute significantly to achieving a USD 1 Trillion digital economy and a USD 5 Trillion GDP by 2025.
Background:
The vision of National Policy on Electronics 2019 notified on 25.02.2019 is to position India as a global hub for Electronics System Design and Manufacturing (ESDM) by encouraging and driving capabilities in the country for developing core components, including chipsets, and creating an enabling environment for the industry to compete globally.
Currently, the laptop and tablet demand in India is largely met through imports valued at ₹ 29,470 crore (USD 4.21 billion) and at ₹ 2,870 crore (USD 0.41 billion) respectively. The market for IT Hardware is dominated by 6-7 companies globally which account for about 70% of the world’s market share. These companies are able to exploit large economies of scale to compete in global markets. It is imperative that these companies expand their operations in India and make it a major destination for manufacturing of IT Hardware.
Given the current global scenario, the world of manufacturing is undergoing a paradigm shift. Manufacturing companies across the globe are looking to diversify their manufacturing locations to mitigate the risk involved in depending on a single market.
PLI Schemes will help in making India a globally competitive destination for electronics manufacturing and create domestic champions to further our mission of achieving an AtmaNirbhar Bharat.
RKJ/M
