Hybrid model under IT PLI 2.0: Global firms allowed to choose lower investment threshold

Under a new hybrid model, global IT hardware manufacturers will have the option to make investments of either `250 crore over a period of six years or Rs. 500 crore over the same period to claim incentives under the revised IT production-linked incentive scheme. Further, even domestic firms can opt for investing the amount of Rs. 250 crore under the hybrid model. In the older PLI scheme, the threshold for investments by global firms was Rs. 500 crore and for domestic firms `20 crore.  

The government on Tuesday released the guidelines for the new scheme, which was approved by the Cabinet on May 17.

“The hybrid category has been introduced to increase the flexibility and make the scheme more attractive,” a government official said.

The overall ceiling of incentives for global companies is kept at Rs. 4,500 crore, whereas for companies (global or domestic) applying under the hybrid category the incentive ceiling is at Rs.2,250 crore.  For domestic companies under the category of `20 crore investments, the incentive ceiling is kept at Rs. 500 crore.

In the revised PLI scheme for IT hardware, the government has increased the total incentive outlay to over two times to Rs.16,939 crore. It also increased the average incentive to 5% from 2% for manufacturing products such as laptops, tablets, All-in-One PCs, servers, ultra-small form factors, among others.

Interested companies can apply under the new PLI scheme for IT hardware from June 1. The application window will be open for a period of 45 days, which may be extended, the government said.

Additionally, the scheme provides increased flexibility for making investments in subsequent years in case of a shortfall, provision for additional incentives of 3-4% if the companies use locally manufactured components such as integrated circuits (ICs) etc. Further, the companies will also be allowed to count incremental investment done by their component manufacturers for meeting the incremental investment thresholds for individual year. However, the manufacturer must exclusively be manufacturing components/sub-assemblies for the applicants.

As per the guidelines, the applicants of the existing hardware PLI scheme, who have not claimed any incentive will be allowed to participate in the revised scheme as new entrants, provided they are selected. For companies, which are looking to claim incentives under the existing PLI for year one and two, will be allowed to participate in the new scheme from the next year (Year 2/Year 3) for which incentive is not claimed.

In such cases, their investment done during the tenure of the existing PLI scheme will be considered an eligible investment under the PLI 2.0 scheme, the government said.

The first version of the scheme, launched in March 2021 with an outlay of Rs. 7,350 crore, received a lukewarm response from the companies. Only two companies — Dell and Bhagwati — were able to meet FY22 targets. Of the projected investments of Rs. 2,500 crore, only `123 crore-worth investments were received. In fact, in the revised scheme, the government has lowered the projected investments to Rs 2,430 crore.

According to the government, the domestic production of electronic items is expected to have reached `8.42 trillion in FY23 as compared to Rs. 6.40 trillion in FY22.