18 Feb Industry cheers PLI for telecom sector; says new scheme to spur jobs, boost innovation
New Delhi: The government unveiled details of the ₹12,195-crore production-linked incentive (PLI) scheme for telecom equipment that’s expected to lead to investment of more than ₹3,000 crore and local production worth ₹2.4 lakh crore, of which exports are pegged at ₹2 lakh crore. The cabinet also approved the signing of a trade deal with Mauritius.
“As a result of the PLI scheme for telecom equipment, government hopes to have incremental production of ₹2,44,200 crore in the sector, exports worth ₹1,95,360 crore, 40,000 new jobs and ₹17,000 crore worth of tax revenue in the coming five years,” communications and IT minister Ravi Shankar Prasad said after the cabinet met Wednesday.
The range of telecom equipment covered under the scheme includes routers, Internet of Things (IoT) access devices, radio access networks for 4G and 5G and wireless equipment, with the main aim being to boost exports. Currently, equipment worth about ₹50,000 crore is imported, mainly from China.
The scheme, effective April 1, is also designed to boost the growth of micro, small and medium enterprises (MSMEs) by supporting locally made products.
For MSMEs, a 1% higher incentive is proposed in the first three years and the minimum investment threshold for them has been fixed at ₹10 crore. For others, it’s been kept at ₹100 crore. Companies will be offered incentives up to 6% of their initial investment over the first two years after their investment, up to 5% till the fourth year and 4% in the fifth year.
PLI for Laptop, PC on Cards: Prasad
Once qualified, the investor will be incentivised by up to 20 times of the minimum investment threshold, enabling them to utilise unused capacity, the government said. The push for local manufacturing comes as the government backs homegrown companies over security concerns, especially related to Chinese vendors Huawei and ZTE, in addition to promoting local industry. A similar scheme introduced to boost the making of handsets has been successful with the likes of Apple and Samsung expanding manufacture within the country, building for the local and export markets.
Prasad said the government had successfully roped in 14 factories from a “neighbouring country,” which he didn’t name but is widely thought to be China, which dominates the global handset manufacturing business. He added that another PLI scheme to encourage production of laptops, tablets and personal computers is on the anvil.
“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,” said SP Kochhar, director general of the Cellular Operators Association of India, which represents telcos Reliance Jio, Bharti Airtel and Vodafone Idea, besides the equipment vendors. However, some said the new scheme will have its own set of challenges.
“India’s strength has been its software technology and this PLI will boost manufacturers who are looking at 5G. But the challenge remains on the hardware side,” said Rohan Dhamija, partner and head, India and the Middle East, Analysys Mason.
“India typically has not been strong on hardware manufacturing and that will remain an untested area.” But both local and overseas vendors such as Sweden’s Ericsson and Finland’s Nokia – the other two major equipment makers besides their Chinese rivals and Samsung—welcomed the initiative.
“We expect it will also provide a fillip to component manufacturing in the country,” said Nitin Bansal, managing director of Ericsson India.
Nokia said it’s already making a range of telecom equipment, from 2G to 5G, in India for domestic as well as global markets. “We hope these incentives will give the right impetus to the telecom manufacturing ecosystem in the country,” said a Nokia spokesperson.
“India is on the verge of 5G scheme and this will be a great advantage,” said NK Goyal, chairman of the Telecom Equipment Manufacturers Association of India, which represents local network gear makers such as Sterlite Technologies, Tejas Networks and HFCL.