IT hardware companies call for more benefits under govt's PLI scheme

Global brands find import of laptops, tablets cheaper than making in India

Global and domestic players eligible under the government’s production-linked incentive (PLI) scheme for IT hardware, have asked the ministry of electronics and information technology (MEITY) for a substantial increase in incentives as well as in the tenure of the scheme, as they are finding it difficult to get global brands to undertake contract manufacturing in India for laptops and tablets. 
 
Global laptop brands feel it is cheaper to import the devices into the country at zero duty from their production bases in China and Taiwan. Hence, there is little incentive for them to manufacture in India or even export them, since the country does not have a domestic component ecosystem.
 
Nearly 20 companies eligible under the IT hardware and mobile device PLI schemes as well as electronic component manufacturers met with the minister of state for Electronics and IT, Rajeev Chandrasekhar, to discuss their concerns about the schemes and the scope for building a component infrastructure. The companies included Dell, HP, Apple, Dixon, Optiemus, Micromax, amongst others.
 
The IT hardware companies have asked the government to double the incentive provided under the scheme, which is between 1 per cent and 4 per cent, depending on the year, on their incremental net sales (2.5 per cent on an average) to five per cent and increase the tenure from four to eight years. Moreover, as five months of FY 21-22, the first year of the scheme, have already elapsed, they want a year’s extension, ie, that the scheme should begin from 2022-23. Some have also demanded that the incremental investment required to be made under the scheme should be reduced.
 
In other electronics products (like mobile devices) there are duties which can be imposed on the import of finished goods, but India is a signatory to the ITA-1 agreement in 1997, which allows the import of completely built units at zero duty for IT products like laptops.
 

Component manufacturers have put in a demand for a special electronics component fund which will offer them finance, especially in the small and medium enterprises (SME) sector, say sources. They have asked for interest subvention and other incentives so they can be globally competitive.
Many of them said that for PLIs to grow, exports have to be a key focus area, as the domestic market is not sufficient for this purpose. 
 
According to the latest numbers released by the India Cellular and Electronics Association, the import of laptops and tablet categories in India has seen a sharp 50 per cent increase in the April-June quarter — from Rs 6000 crore in FY20-21 to Rs 10,000 crore in FY 21-22.
 
A recent EY study said that the total market for laptops in India in 2019-20 was pegged at $4.85 billion. Chinese imports dominated, with a market value of $3.65 billion.
 
Says a top executive at one of the companies cleared for PLI: “The disability between India and China in laptops ranges from 8.5 per cent to 9 per cent. Clearly, the PLI incentive is not enough to bridge this gap and make made-in- India attractive. Also, we do not have a components infrastructure in the country and that will take time. So a PLI for four years to build a local components base is too short.” The government had earlier put together an ambitious plan for enhancing exports under the PLI scheme for IT hardware. In February this year MEITY had projected a total production of Rs 326,000 crore in the next four years of the scheme, out of which 75 per cent would come from exports.
 
Yet a press release in July, announcing commitments made by 14 companies (global and domestic) that were eligible under the scheme, suggests that the total production value in the next four years is expected to be only Rs 160,000 crore, which is half of the government’s earlier projections. Exports, too, would be only 37 per cent of the total production value, a steep drop from the earlier target.