IT hardware PLI scheme facing roadblocks

With demand slowing down, India being uncompetitive when compared to China, Thailand, Vietnam for exports, and supply chain issues not getting resolved, the Indian IT hardware manufacturers are not warming up to the PLI scheme draft being penned by the government.

The industry has major reservations on the government proposing to link investments with incentives, which is the underlying basis of all PLI schemes. So far, a little more than Rs 120 crore has been invested by the companies selected under the scheme, far short of the projected investments of Rs 2,500 crore.

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.

When the govt did not get the desired response, it proposed to increase the overall outlay for the scheme to around Rs 20,000 crore. The updated scheme proposed to increase incentive rates to nearly two times, and to allow for increased flexibility, applicants will be able to decide their own start and end dates between a period of five to seven years. One of the key changes expected in the scheme is that it will increase the overall average incentive rate to more than 5 per cent for domestic and global companies, up from the current rate of 2.21 per cent for both categories. Companies that locally manufacture certain components could also get additional incentives under the restructured scheme. For instance, companies that manufacture batteries and printed circuit board assemblies locally would receive an additional incentive of 1.25 per cent, and if they also manufacture power modules domestically, the incentive rate could increase by 2.25 per cent.

The powers that be will need to do some out-of-the-box thinking for manufacturing in this sector to take off.

CT Bureau