PLI scheme: Telecom eligibility criteria for companies may be raised

The draft note on the production-linked incentive (PLI) scheme for promoting telecom equipment manufacturing will sharply increase the threshold for eligibility in the case of global as well as domestic companies.

The note, under discussion by the Department of Telecommunications (DoT), has set a target that 80 per cent of incremental production in value terms under the PLI will be for exports.

Global companies like Ericsson, Nokia, Huawei, or Samsung will require making an incremental investment of Rs 750 crore (earlier it was Rs 600 crore) in four years and undertake incremental sales (net of taxes) from the base year starting with Rs 1,000 crore and increasing it to Rs 6,000 crore in the fifth year, which is double of what was earlier envisaged. 

The incentive for companies that achieve these targets will remain 4-6 per cent. Incremental sales the global companies have to commit in the five years to be eligible for the incentive have been upped from Rs 9,000 crore to Rs 16,500 crore.  

In the case of domestic companies owned and controlled by resident Indians citizens, the cumulative incremental investment they have to make is planned to be increased from Rs 40 crore to Rs 60 crore in four years. 

The incremental sales they have to undertake are pegged at Rs 100 crore in the first year, going up to Rs 600 crore in the fifth year, which is double of what was envisaged earlier.

The sales they have to undertake now in five years would go up from Rs 1,000 crore earlier to Rs 1,650 crore in the current plan. 

The incentive will remain at the same levels as that of global players. Under the scheme the government anticipates it will get an investment of Rs 8,000 crore, an incremental production of Rs 1.81500 trillion and an incremental export of Rs 1.45200 trillion in five years. The outlay for incentives will be Rs 15,194 crore, which will begin with only Rs 660 crore in the first year, going up to Rs 5,803 crore in the fifth year. 

Currently according to DoT estimates, the telecom sector consumes over $10 billion of equipment, of which only $3 billion is made in India. 

The imports of telecom equipment hit Rs 51,308 crore in 2018-19. The sector faces a cost handicap vis-a-vis their competitors in other parts of the world between 8.5 per cent and 11 per cent on account of various constraints, which the PLI scheme is expected to bridge. 

However, telcos have raised some key issues on the PLI scheme. 

Nitin Bansal, managing director of Ericsson India, in an interview had said: “We already export from India and can surely scale up. We have been investing in manufacturing in India since 1994-but we want this investment to be considered for PLI eligibility and not only the incremental investment made from the day the scheme is implemented”.  

Another leading gear maker points out that even though a substantial portion of its products are exported, its factories are still around 50 per cent capacity. 

“There is no logic of imposing an incremental investment clause. Why should we invest more when we have capacity already available? Also the PLI scheme still does not make us competitive vis-a-vis countries like Vietnam and Thailand. Despite the fact there are opportunities from Australia and Japan, which want to buy telecom equipment not coming from China but other countries.”