IT hardware companies may get more time for local manufacturing, ET Telecom

New Delhi: The government is open to the idea of giving foreign companies more time to set up manufacturing units provided they submit a clear, detailed and graded roadmap of their make-in-India plans for specific products such as laptops, personal computers and servers, a senior government official said.

The companies have sought up to 12 months to set up local factories.

If the government is satisfied with plans submitted by the companies, it could think of providing some relaxation on the licensing norms for import of such items, which also include tablets and small form factor computers.

“The idea is to encourage the Apples, Dells and HPs of the world and others to start their production in India and not just be present through contract manufacturing or white labels,” the official said.

The government is in constant touch with the companies on the timelines and the requirements for India production.

“We will work on it with them,” the official added.

The Directorate General of Foreign Trade (DGFT) issued a notification on August 3 mandating that import of electronics items such as laptops, tablets, all-in-one-PCs, ultra-small factor computers and servers would be “restricted”. Companies importing these items would need to apply for an additional licence to bring them into the country, it said.

Following pushback from the industry, the DGFT issued a revised notification postponing the deadline for the licensing requirement by three months to November 1.

The earlier notification had a clause that said it will be applicable with “immediate effect,” which caused confusion and halted shipments, said the official. “They have resumed now. And even after November 1, it is a simple process of getting a licence in five minutes.”

Senior government officials had clarified earlier that the restrictions were not meant to discourage imports as was widely believed. The procedure to apply for a licence would be simple and quick, they said.

Industry executives are of the view the ecosystem in the country is not yet ready to quickly transition to manufacturing on the scale that’s required.

ET reported on Friday that the Nasscom lobby group had asked the government to review the move as it will take a toll on the $245 billion Indian IT sector, one of the largest consumers of electronic products.

Going ahead, the ministry of electronics and information technology, the nodal ministry handling electronics manufacturing in the country, is likely to ask the companies to submit their India manufacturing unit plans and the best possible way to start production within the next 24 months, another official said.

“It goes without saying that the demand for these electronic products in India will only increase in time to come,” said the official cited above. “The country already has well-established ecosystems for the manufacture of several electronic items. Surely, these companies can look at harnessing some of them and starting production lines here.”

Sources said the IT ministry had been in constant touch with companies and had kept them informed of likely non-tariff barriers in the offing.

“We had been in touch with them (electronics manufacturers) for the past seven-eight months and they were kept in the loop about the possible ways in which this could happen,” said one of them.

On August 9, ET reported that major global electronics manufacturers such as Apple, Dell, HP, and Acer met senior officials of the IT ministry and sought an extension of nine months to a year of the deadline for licences. The companies said that they will need this time to set up domestic manufacturing facilities.

“The requirement of obtaining licences is a cause for concern for the industry as this is seen as creating uncertainty as to whether they will be able to import the items as per their needs and the red tape that may get created,” Nasscom vice president and head of public policy Ashish Aggarwal had then told ET.

The country imported IT hardware products worth $8.8 billion in FY23, with China accounting for more than half at $5.1 billion, followed by $1.3 billion from Singapore. The government expects import licensing to encourage local manufacturing with the production-linked incentive (PLI) scheme for IT hardware acting as a spur.

The response to the first phase of the PLI scheme had been lacklustre. Only Dell, Bhagwati Products (Micromax Informatics) and Dixon had been able to meet their targets of the total 14 companies that had applied for incentives.

In May, the cabinet approved the second phase of the PLI scheme for IT hardware, doubling the incentive outlay to Rs 17,000 crore. The government also increased the incentive structure and allowed applicants to choose 2023, 2024 or 2025 as the base year for starting production. It also offered incentives of up to 5% on incremental sales, more than double the roughly 2% being offered under the first phase.

So far, about 44 companies have applied for the PLI scheme for IT hardware manufacturing, according to government officials. The deadline for the PLI scheme for IT hardware has been extended twice so far. The new deadline is August 30.

  • Published On Aug 14, 2023 at 08:29 AM IST

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