India okays $1.68 bn scheme for local telecom manufacturing

India’s Cabinet on Wednesday approved the Production Linked Incentive (PLI) Scheme for telecom and networking products at a budgetary outlay of Rs 12,195 crore or $1.68 billion.
Lava smartphone manufacturing
The scheme will offer gearmakers annual cash incentives of between 4 percent and 7 percent on any increase in sales of locally-made equipment over the next five years, compared with 2019-20 levels.

Last year, India launched a $6.65 billion incentive plan to deepen smartphone manufacturing in the country.

Foxconn, Wistron and Pegatron, three of Apple Inc’s top contract manufacturers plan to invest a total of almost $900 million in India over five years to tap into that plan, Reuters has previously reported.

Prasad recounted the success of the smartphone scheme, saying a top mobile maker will assemble $40 billion worth of devices in India over five years and export them to markets, including the United States and Europe.

“This large company has employed 20,000 people so far and will employ 100,000 directly and 300,000 indirectly by the next year,” Prasad said, without naming the company.

The Production Linked Incentive (PLI) Scheme aims to promote manufacture of telecom and networking products in India and proposes financial incentive to boost manufacturing and attract investments in the target segments in order to encourage Make in India.

Eligibility will be subject to achievement of a minimum threshold of cumulative incremental investment over a period of four years and incremental sales of manufactured goods net of taxes (as distinct from traded goods) over the Base Year 2019-2020. The cumulative investment can be made at one go, subject to annual cumulative threshold as prescribed for four years being met.

India will augment capacities by attracting large investments from global players and at the same time, encourage promising domestic champion companies to seize the emerging opportunities and become big players in the export market.

The scheme is part of the umbrella scheme approved by the Cabinet in Nov 2020 for implementation of PLI under various ministries and departments including Department of Telecommunications (DoT).

There will be a minimum investment threshold of Rs 10 crore for MSMEs with incentives from 7 percent to 4 percent and Rs 100 crore for others with incentives from 6 percent to 4 percent over 5 year above base year. The applicants with higher investments than specified threshold under MSME and Non MSME categories will be selected through transparent process.

The government believes that India will be positioned as a hub for manufacturing of telecom and networking products with this scheme. Incremental production around Rs 2 lakh crore is expected to be achieved over 5 years. India will improve its competitiveness in manufacturing with increased value addition.

It is expected that scheme will bring more than Rs 3,000 crore investment and generate huge direct and indirect employments.

“We welcome the implementation of the PLI scheme on telecom equipment. Telecom is the backbone of a digitally connected India and this initiative will further boost local manufacturing and create employment opportunities. India is already the second largest telecom market globally and this will go a long way in making the country a global hub for telecom innovation,” SP Kochhar, director general of COAI, said.

“The approval of the PLI scheme for telecom equipment manufacturing by the Union Cabinet earlier today is a significant boost for product manufacturing in the telecom sector. This move would incentivise the telecom service providers by opting for equipment’s manufactured locally savings on a substantial costs relating to imports,” Tony Verghese, partner at J Sagar Associates, said.