IT hardware PLI 2.0: Cabinet approves renewed scheme with Rs 17,000 crore outlay, investment projection unchanged
The Union Cabinet Wednesday cleared a revised production-linked incentive (PLI) scheme for IT hardware with an outlay of Rs 17,000 crore, more than doubling the budget for the scheme that was first cleared in 2021. The first version of the scheme was a laggard with only two companies – Dell and Bhagwati – managing to meet first year’s (FY22) targets, with the industry calling for a renewed scheme with an increased budgetary outlay.
Union Minister of Electronics and IT Ashwini Vaishnaw said that the renewed scheme could attract big global IT hardware manufacturers to shift their production base to India and give a boost to local production of laptops, servers and personal computers among others.
The tenure of the new scheme has been fixed for six years and the Centre is expecting an investment of over Rs 2,430 crore as part of it. The expected incremental production value could touch Rs 3.35 lakh crore, and the scheme could generate 75,000 direct jobs – in total, the employment figure could touch 2 lahks when accounted for indirect jobs.
It is worth noting that under the previous PLI scheme, the expected investment was pegged at Rs 2,500 crore – under the renewed plan, that projection has been reduced (to Rs 2,430 crore) despite sweetening the incentive structure. “These are tentative projected investment figures, things depend a lot on the environment. In the telecom PLI for instance, expected investment was around Rs 900 crore, but the actual investment was Rs 1,600 crore,” Vaishnaw said.
The average incentive over six years will be about 5 per cent compared with the 2 per cent over four years offered now. Companies that locally manufacture certain components could also get additional incentives under the restructured scheme. There will be flexibility in choosing the base year as well.
“IT hardware manufacturing is a complex ecosystem… 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,” Vaishnaw said.
“Today’s Cabinet approval of IT hardware PLI2.0 is focussed on expanding India’s production and presence in Global value chains of IT hardware, servers and laptops. By deepening & broadening the electronics ecosystem in India, this scheme will play a key role in catalysing India’s Techade and in achieving the $1 trillion digital economy goal – including $300 billion of electronics manufacturing by 2025-26,” Minister of State for Electronics and IT Rajeev Chandrasekhar said in a statement.
The PLI for IT hardware such as laptops, tablets, all-in-one computers, and servers was first announced in February 2021 with an initial outlay of around Rs 7,300 crore over a period of four years. Under the scheme, domestic players investing Rs 20 crore and clocking sales of Rs 50 crore in the first year, Rs 100 crore in the second, Rs 200 crore in the third, and Rs 300 crore in the final year, would pocket incentives of 1-4 per cent on incremental sales over 2019-20, the base financial year.
The Manufacturers’ Association For Information Technology (MAIT), the industry body that represents companies like Apple, Dell, HP and Lenovo, had earlier called for increasing incentives offered under the scheme. In fact, the body had said that the scheme’s outlay had to be Rs 20,000 crore. “I don’t think that, for PCs, if you relocate and reposition supplies from China or other parts of the world, it will be possible with just these kinds of funds. They are very insignificant… At least Rs 20,000 crore is required (under PLI). It is based on value addition potential that exists in the country,” MAIT President Nitin Kunkolienker had told news agency PTI in 2021.
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