Scheme for IT hardware: PLI pledges miss govt's ambitious target

Production and export commitments by 19 companies are much lower than government's projections

The commitments made by 19 companies which have applied for the government’s production-linked incentive (PLI) scheme to manufacture IT hardware such as laptops, tablets, all-in-one PCs and servers, fall far short of the ambitious projections for exports, production, employment and incremental investments.   

When the Cabinet cleared the PLI scheme in February this year, the ministry of electronics and information technology (MEITY) had projected a total production value of Rs 326,000 crore in the next four years. Of this, 75 per cent, or Rs 245,000 crore, was expected to be exported. It was also expected to bring in additional investment worth Rs 2700 crore and generate 180,000 direct and indirect jobs.

The numbers were reiterated on 5 March in a webinar presented by the Department for Promotion of Industry and Internal Trade (DPIIT) with Niti Aayog and other stakeholders. The numbers for IT hardware under the scheme were also cited again.

Yet a press release on 4 May, announcing commitments made by 19 companies (global and domestic) that had applied for the scheme, suggests that the total production value in the next four years is now expected to be only Rs 160,000, which is half of the government’s earlier projections.

The difference between the projection and the reality is even more stark in the case of total exports, a key focus of the scheme. The exports committed by the players is pegged at Rs 60,000 crore — a drop of over 75 per cent from the government’s target. Hence, the total exports translate to only 37 per cent of the production value committed by the players — compared to the 75 per cent that the government had earlier projected. 

Again, the additional investment commitment of Rs 2350 crore is 13 per cent lower than the government’s projections, and the total number of jobs likely to be created is 150,000 (37,500 direct employment and the rest indirect), which is 16 per cent less than what the government had been banking on. 

Under the IT hardware scheme, the government was offering incentives ranging from 1 per cent to 4 per cent for a period of four years on net incremental sales. However, companies have to meet certain localisation norms, apart from the threshold of incremental investment and sales, to be eligible for the incentive. In the case of global companies, for example, their laptops would have to have an invoice value of over Rs 30,000.

The government had earmarked Rs 7325 crore under the scheme. Companies like Dell, Wistron, Flextronics, Rising Stars, Foxconn and local players like Lava, Dixon, Micromax, amongst others, have applied for the scheme.  

The applicants say that they are looking at the scheme initially for import substitution or to sell in the domestic market with limited exports. Says a top executive at one of the companies which have applied for the scheme: “The bulk of Indian laptops are mostly imported from China. So we will initially cater to the domestic market and only when supply chain through localisation is built can we go for exports”.

Many like the Indian Cellular and Electronics Association have expressed concern that attaching localisation norms to a PLI scheme which is meant to encourage exports may not comply with WTO regulations and could be challenged.

A senior executive of a company which has not applied for PLI in hardware, despite being a global laptop manufacturer, says: “The scheme is nothing but a subsidy being offered to incentivise PC companies to sell to the government in bulk at lower prices. It has no real attraction for global companies looking at exports”