After industry concerns, India plans to review electronic PLI schemes

PLI schemes India
Image by HannaKuprevich | Bigstockphoto

India is evaluating options to make its existing production-linked incentive (PLI) schemes for electronic manufacturing attractive following concerns raised by the industry citing the inability to achieve production targets by 2026.

The Ministry of Electronics and Information Technology (MeitY) is expected to soon start a comprehensive review of its ambitious PLI schemes for IT hardware and mobile handset electronic manufacturing.

The IT hardware and handset manufacturers had previously told the Indian government that the previous targets were unachievable after which the target was lowered to $250-$300 billion worth of local production by 2026. 

Due to the ongoing disruption in the global supply chain coupled with policy-related challenges, the industry has again raised concerns and conveyed that even the existing target might be tough to achieve, as per a report by the Economic Times. 

“We have been asked to give a detailed roadmap of how to achieve the $250-$300 billion target for electronic production by 2026,” a MeitY official was quoted as saying by the publication. The review will have a special focus on the IT hardware scheme.

While the PLI on handsets was well received by mobile phone makers in India, the industry gave a lukewarm response to the PLI on IT hardware comprising laptops, tablets and data servers.

The publication reported that the minister of state for electronics, Rajeev Chandrasekhar, recently asked the MeitY officials to come up with a plan to ensure that the set targets are achievable by 2026. He has also asked officials to see if tweaks are required to make the existing PLI scheme for IT hardware more attractive.

After the review, the government may also float a new scheme for IT hardware.

The Scheme on IT hardware received a poor response with the 14 companies approved under the scheme cumulatively committing to produce far lower than expected by the government. 

Multinational companies Dell, ICT (Wistron), Flextronics and Rising Stars Hi-Tech (Foxconn) were approved earlier this year by the government along with ten domestic companies to produce Laptops, Tablets, All-in-One Personal Computers (PCs) and Servers. 

Under the domestic category, Lava International Limited, Dixon Technologies (India) Limited, Infopower Technologies (JV of Sahasra and MiTAC), Bhagwati (Micromax) Neolync, Optiemus, Netweb, Smile Electronics, VVDN and Panache Digilife received the approval.

As per the report, companies like Dell, Flex, Foxconn and Wistron have committed production worth only $21.62 billion by 2026, which is about half of the target.

iPhone-maker Apple was expected to participate in the scheme to manufacture iPads and Macbook laptops through partners. However, the company gave the IT hardware scheme a complete miss.

“The $250 billion by 2026 will need many strategic pieces to come together in perfect harmony.. beyond strengthening mobile phone production, the country needs a product-wise focus to clock $250 billion for domestic and exports separately,” Pankaj Mohindroo, chairman of India Cellular and Electronics Association (ICEA) told the newspaper. “…new PLI schemes, sharp reduction in GST/import tariffs on inputs and a planned move to shift the ecosystem from China and Vietnam, are key to our success.”

ICEA represents smartphone makers like Apple, Oppo, Vivo and Xiaomi and global contract manufacturers such as Foxconn and Wistron, among others.

India’s Manufacturers Association of IT (MAIT), which represents  Acer, Cisco, Dell, HP, Intel and Samsung, among others, has also demanded policy tweaks to the PLI for IT hardware. It has asked MeitY to more than double, both the incentive rate (currently at 2.3%) as well as the outlay to around $2.7 billion from $993 million to attract more global players.

“When companies are looking to diversify their risk, and move out of China to India, time is of essence…the government needs to act fast as time is running out to meet the government’s revised target of hitting the $250 billion production in electronic manufacturing by 2026. The decision to manufacture out of a new location takes time to plan and execute,” he said. We shouldn’t hesitate to fine tune our policies,” George Paul, chief executive of MAIT told the publication.

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