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<\/p>\nIt started out as a Production Linked Incentive (PLI) scheme to make India an export hub.<\/p>\n
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But after many a twist and turns, the latest 2.0 PLI for IT hardware, for which the 40 eligible candidates have applied till its deadline, is now focused on ‘import substitution’.<\/p>\n
The scheme will help in reducing India’s over-dependence on imports (80 per cent of laptops are imported), especially from China which include laptops, tablets and servers.<\/p>\n
They will be assembled in India.<\/p>\n
Exports will take the back seat but the PLI will help in incentivising the local supply chain to support the products.<\/p>\n
The 40 players have committed only Rs 28,288 crore as exports, which is only over 6 per cent of their projected incremental production value.<\/p>\n
In 2021, the government put out an estimate, while launching the initial IT hardware PLI, that it will lead to an incremental production of Rs 3.26 trillion.<\/p>\n
Of this, nearly 75 per cent would be exported with an incremental investment of Rs 2,700 crore.<\/p>\n
But three months later, based on a very tepid response from applicants, the targets were substantially tweaked.<\/p>\n
The total production that the eligible players collectively offered to reach was half, or Rs 1.61 trillion, and their export commitment was only Rs 60,000, a mere 37 per cent of the initial government target.<\/p>\n
What’s more, the incremental investment that the companies were ready to commit was Rs 2,350 crore, 12 per cent lower than the number the government had in mind.<\/p>\n
In total, 19 companies (14 Indian and 5 global) applied under the scheme, including Dell, Flex, Wistron, and Rising Star, and 14 were given the green signal.<\/p>\n
But it was clear from the beginning that the scheme would not work and this was reflected in the fact that, except for a few such companies as Dixon or Dell, most firms could not even meet their targets of investment and production for the first year to be eligible for incentives.<\/p>\n
The reason was that they had serious issues.<\/p>\n
For one, the time period for PLI was only for four years and the allocation of only Rs 7,350 crore was not enough.<\/p>\n
The firms asked for seven years because there was hardly any supply chain in the country.<\/p>\n
For another, the incentive at an average for four years, was a mere 2.2 per cent which clearly was not attractive enough for foreign firms to shift their manufacturing bases from China.<\/p>\n
Third, India was one of the signatories of the International Technological Agreement in which member countries agreed to zero duty on hardware.<\/p>\n
The last issue was that the scheme imposed a tough timeline on localisation of components which most players said was hard to implement.<\/p>\n
Domestic EMS players could not make any progress as they did not have the wherewithal and experience to tie up with global IT PC brands to become their vendors.<\/p>\n
The ministry of electronics and information technology was aware that the PLI scheme was not working and needed a revamp.<\/p>\n
In an interview, Minister of State for Information & Technology Rajeev Chandrasekhar said the ministry was working on a new IT hardware PLI where the focus would be to replicate the mobile device model and bring in big global players to shift capacity from China.<\/p>\n
He said, unlike in other countries, the number of laptop makers was limited to only a handful of players and he was talking to them to understand what they needed to make the shift.<\/p>\n
These responses have led to the latest IT hardware PLI scheme.<\/p>\n
The big players — HP, Dell, Acer, Asus and EMS players like Foxconn and Flex — have all applied.<\/p>\n
Many of them might have shown renewed interest in the PLI because of the government’s new diktat that companies now need a licence to import laptops and PCs, which is seen by many as a way to prod or impel them to make in India.<\/p>\n
The allocation has also been more than doubled to Rs 17,000 crore and the timeline is now six years.<\/p>\n