MeitY prepares a fresh draft of PLI scheme for IT hardware

With its efforts to push local manufacturing of IT hardware such as laptops, tablets, desktops and servers having failed in the first round, the ministry of electronics and information technology (MeitY) has now prepared a fresh draft of the production-linked incentive (PLI) scheme to attract global majors like Dell and HP.

The draft proposes to increase the outlay of the scheme to Rs 18,000 crore, a two-and-a-half times increase from Rs 7,350 crore in the previous version of PLI, sources in the know said.

The government has also proposed to increase the duration of the scheme to eight years with a proviso to claim incentives in any of the six years; make investments flexible with an option to make up for the same in subsequent years; and allow companies to even include investments made by their suppliers, according to sources. The revised scheme is likely to be notified shortly by the government.

Currently, the scheme has a four-year tenure and if companies fail to meet the laid down incremental production and sales target in a given year, they are not paid any incentive for that year.

Flexibility in investments was among the key demands of the global manufacturers. Accordingly, the government has allowed shortfall of investments to the extent of 40% of the required investment with a 20% reduction in the incentive payout. Simply put, if the investment required in a particular year is Rs 50 crore and a company can only manage Rs 30 crore, it will still get the incentive. The deducted incentive in such cases can be claimed by the company in subsequent years upon covering up the shortfall in earlier investment.

The incentive for local assembly of products has also been made attractive. For instance, if a company assembles display panels locally, it will get an additional incentive of 1.65% on the complete laptop.

In March 2021, the government had notified the hardware PLI scheme to make India a globally-competitive destination for laptops and tablets. However, the scheme witnessed a lukewarm response with investments of only Rs 123 crore, significantly lower than the projected investments of Rs 2,500 crore.

Companies such as Dell, ICT Service (Wistron), Lava, Dixon, Rising Stars Hi-Tech (Foxconn), Netweb Technologies, Optiemus Electronics, VVDN Technologies, among others, are the participants in the current IT Hardware PLI scheme.

With the revamped version, especially the inclusion of investments made by suppliers, the government is looking to attract US companies particularly Dell, HP and Apple. According to government sources, the investment criteria was bothering Dell and HP.

Under the current scheme, while domestic companies have to make investments of Rs 20 crore for four years, foreign companies have to make investments of Rs 500 crore for four years in order to be eligible for incentives.

The government is targeting $300 billion worth of electronics production in the country by 2025-26, out of which $120 billion is expected to be exported. Of the total target, IT hardware (laptops, tablets, personal desktops and servers) is expected to contribute $25 billion whereas the IT hardware exports are estimated to reach $12-17 billion by 2025-26. Financial Express