PLI Scheme for Manufacturing IT Hardware in India

The second phase of the Production Linked Incentive (PLI) scheme has been allocated a budget of INR 170 billion (equivalent to USdFF2.05 billion) and spans a duration of six years. This initiative aims to bolster the electronics manufacturing sector in India, leveraging the exchange rate of USD1=INR 82.72. Under the IT PLI scheme 2.0, various devices including laptops, tablets, all-in-one PCs, servers, and ultra-small form factor devices are encompassed. Projections suggest that this scheme will drive incremental production worth INR 3.35 trillion (approximately USD40.48 billion), attract incremental investment amounting to INR 24.3 billion (about USD293.64 million), and lead to the creation of 75,000 jobs throughout the scheme’s six-year implementation period. Following input from the industry, the Cabinet has granted approval for the revised edition of the scheme.

SOME KEY FEATURES OF THE SCHEME ARE:

• The PLI Scheme 2.0 for IT Hardware is aimed at boosting the domestic production of IT hardware products including laptops, tablets, all-in-one PCs, servers, and ultra-small form factor (USFF) devices.
• Eligible companies will receive financial incentives based on their incremental sales and investment performance, fostering a competitive environment.
• The scheme encompasses the manufacturing of key components and sub-assemblies such as semiconductor design, IC manufacturing, and packaging, essential for a robust IT hardware ecosystem in India.
• Over a period of six years, the scheme will provide an average incentive of approximately 5% on net incremental sales of goods manufactured within India and covered under the target segment.
• The scheme offers flexibility and options for applicants, encouraging the localization of the value chain within the country.
• Anticipated benefits include the generation of employment opportunities, promotion of innovation, enhancement of exports, and overall growth of the IT sector in India.

CALCULATION OF INCENTIVES:

Under the PLI 2.0 Scheme, incentives are applicable for a duration of 6 years, commencing either from July 1, 2023, April 1, 2024, or April 1, 2025. The selection of the start date depends on the applicant's commitment to incremental investment and sales. Net incremental sales calculation utilizes the base year of FY 2022-23, with adjustments for different participation years: FY 2023-24 or FY 2024-25 for April 1, 2024, or April 1, 2025, respectively. However, FY 2021-22 is considered for qualification criteria irrespective of the participation year.

Incentives are determined based on net incremental sales compared to the base year, with maximum caps set at INR 45 billion for global companies, INR 22.50 billion for hybrid entities, and INR 5 billion for domestic firms.

ELIGIBILITY:

Category: Global IT Hardware Companies

Incremental investment after March 31, 2023: INR 5 billion over 6 years (cumulative minimum).

• Year 1: INR 500 million
• Year 2: INR 1.5 billion
• Year 3: INR 2.5 billion
• Year 4: INR 3.5 billion
• Year 5: INR 4.5 billion
• Year 6: INR 5 billion

Incremental sales of manufactured goods over base year:

• Year 1: INR 10 billion
• Year 2: INR 25 billion
• Year 3: INR 50 billion
• Year 4: INR 100 billion
• Year 5: INR 120 billion
• Year 6: INR 150 billion

Eligible Products: Laptops (Invoice value of INR 30,000 and above), Tablets (Invoice value of INR 15,000 and above), All-in-One PCs, Servers, Ultra Small Form Factor (USFF)

Category: Hybrid (Global/Domestic) Companies

Incremental investment after March 31, 2023: INR 2.5 billion over 6 years (cumulative minimum).

• Year 1: INR 250 million
• Year 2: INR 750 million
• Year 3: INR 1.25 billion
• Year 4: INR 1.75 billion
• Year 5: INR 2.25 billion
• Year 6: INR 2.5 billion

Incremental sales of manufactured goods over base year:

• Year 1: INR 5 billion
• Year 2: INR 12.5 billion
• Year 3: INR 25 billion
• Year 4: INR 50 billion
• Year 5: INR 60 billion
• Year 6: INR 75 billion

Eligible Products: Laptops (Invoice value of INR 30,000 and above), Tablets (Invoice value of INR 15,000 and above), All-in-One PCs, Servers, Ultra Small Form Factor (USFF)

Category: Domestic Companies

Incremental investment after March 31, 2023: Cumulative minimum:

• Year 1: INR 40 million
• Year 2: INR 80 million
• Year 3: INR 120 million
• Year 4: INR 150 million
• Year 5: INR 180 million
• Year 6: INR 200 million

 Incremental sales of manufactured goods over base year:

• Year 1: INR 500 million
• Year 2: INR 1 billion
• Year 3: INR 2 billion
• Year 4: INR 3 billion
• Year 5: INR 4 billion
• Year 6: INR 5 billion

Eligible Products: Laptops (Invoice value of INR 30,000 and above), Tablets (Invoice value of INR 15,000 and above), All-in-One PCs, Servers, Ultra Small Form Factor (USFF)

OVERALL CHALLENGES INVOLVED:

• One critical aspect for the success of IT hardware manufacturing is the availability of skilled manpower and robust infrastructure. Skilled workers proficient in areas like electronics assembly, quality control, and product testing are essential. Moreover, quality infrastructure encompassing reliable power supply, transportation networks, and access to industrial zones is vital for smooth operations and logistical efficiency.
• Adhering to environmental and safety standards is non-negotiable in IT hardware manufacturing. This entails implementing eco-friendly practices, managing electronic waste responsibly, and ensuring workplace safety. Compliance not only safeguards the environment and workers' well-being but also enhances the company's reputation and market acceptance.
• Protecting intellectual property rights (IPR) and ensuring data security are paramount concerns in the IT hardware industry. Companies must implement robust strategies to safeguard their innovations, designs, and proprietary technologies from infringement and unauthorized use. Similarly, stringent measures to safeguard consumer data against breaches and cyber threats are imperative to uphold trust and confidentiality.
• Global competition in the IT hardware sector is intense, with various countries offering attractive incentives and support to manufacturers. To remain competitive, it's essential for India to continuously evaluate and enhance its incentive schemes, infrastructure, and regulatory frameworks. This includes fostering innovation, reducing bureaucratic hurdles, and providing tailored support to encourage investments and growth.
• Effective coordination among stakeholders, including central and state governments, industry associations, academia, and research institutions, is vital for the development of the IT hardware manufacturing ecosystem. Collaboration facilitates the exchange of knowledge, policy formulation, and implementation of industry best practices. It also fosters synergy, aligns objectives, and accelerates collective efforts towards achieving common goals, such as promoting innovation, addressing skill gaps, and fostering sustainable growth in the IT hardware sector.

In essence, the journey towards establishing a robust IT hardware manufacturing sector in India is multifaceted and demanding. It necessitates a strategic focus on multiple fronts, including skilled manpower, infrastructure, regulatory compliance, intellectual property protection, competitive positioning, and stakeholder collaboration. Each aspect plays a pivotal role in shaping the industry's trajectory and impact on the broader economy. As India navigates through the complexities and challenges inherent in this endeavour, concerted efforts, sustained investments, and proactive policies will be indispensable. By addressing these elements holistically and with unwavering commitment, India can aspire to unlock the full potential of its IT hardware sector, fostering innovation, job creation, and sustainable growth in the digital age.

To learn more about how to pitch for the PLI scheme, the process of application, disbursement of incentives, the key obligations of the recipient- CLICK HERE.