PLI scheme – A bid to boost manufacturing; focus on telecom sector

Policharcha.com | Updated: May 22, 2021, 1:57 PM

Share on:

PLI scheme – A bid to boost manufacturing; focus on telecom sector

To fulfil the vision of the National Policy on Electronics 2019 (NPE 2019), the Government of India had launched the Production Linked Incentive (PLI) scheme in April 2020 in the hopes of positioning India as a global hub for Electronic System Design and Manufacturing. Experts have welcomed the scheme, and it has already started showing results as many firms are already reaping benefits of it.

In April this year, the Government announced ₹12,000 crore under PLI to boost the telecom sector. The second round of this scheme incentivises investment in mobile phones and electronic component production which is expected to contribute to India's march towards not only attaining 5G network, but also becoming a net exporter of 5G related equipment and services.

-------------------------

Also read: 5G, Second Wave, Protests, and China factor: Everything you need to know about 5G trials in India

-------------------------

How PLI scheme works?

The scheme offers a production linked incentive to boost domestic manufacturing, and attract large investments in mobile phone manufacturing and specified electronic components, including Assembly, Testing, Marking, and Packaging (ATMP) units. The scheme would substantially boost the electronics manufacturing landscape, and establish India at the global level in the electronics sector.

"The scheme shall extend an incentive of 4% to 6% on incremental sales (over the base year) of goods manufactured in India and covered under target segments to eligible companies for a period of five years subsequent to the base year as defined,” said the Ministry of Electronics and Information Technology (MeitY).

After the success of the first round of the scheme, the MeitY also announced the second round of incentives to attract investments in mobile phone and electronic component manufacturing.

Simply put, under the scheme companies are rewarded for increasing their outputs over a certain base year.  

PLI and the Telecom Industry

The struggling telecom industry got a boost with ₹12,195 crores notified through the PLI scheme for telecom and network products in February this year. The products that will benefit from this scheme are core transmission equipment, 4G/5G, next-gen RAN and wireless equipment, access and customer premises equipment, IoT access devices, and enterprise equipment like switches, routers, etc. The base year for these products' production would be 2019. This is going to give a major boost to manufacturers to scale up their productions.

With India trying to gain momentum in its bid for a 5G network, these steps are expected to act as a catalyst for the process.

Network vendors, telcos, and operators said that the 12,195 crore SoPs cleared by the Cabinet under the PLI policy for telecom gear can result in production worth Rs 2 lakh crore over the next five years. It would speed up India’s emergence as a global 5G gear manufacturing hub, boost network gear exports, and create a robust components ecosystem.

The scheme has also been able to win over foreign investment. Samsung, Foxconn, Hon Hai, Rising Star, Wistron, and Pegatron have benefited from the scheme. Of these, Foxconn, Hon Hai, Wistron, and Pegatron are contract manufacturers for Apple iPhones. In March this year, manufacturing giant Samsung joined hands with Jio to make 4G/5G gear for it in the country.

Industry experts believe that the scheme can make India a manufacturing hub in the 5G manufacturing sector. 

An eye on the environment

One of the major issues in the world today is the environmental degradation the planet is facing. India is also under pressure to announce its ‘net zero’ plans. To help India manage and curb climate change, the PLI incentivises climate-friendly technologies. Companies that work towards replacing polluting technologies will be supported through this scheme. In April this year, a 4500 crore PLI scheme was announced for high-efficiency solar photovoltaic modules.

Other beneficiary Industries

PLI scheme – A bid to boost manufacturing; focus on telecom sector

When launched in April 2020, the main sector this scheme targeted was Electronics manufacturing, but now 10 more sectors have been included, like food processing, telecom, electronics, textiles, speciality steel, automobiles and auto components, solar photovoltaic modules, and white goods such as air conditioners and LEDs as the project was expanded successfully.

A financial outlay for 5 years has been approved for each of the late entrants, as follows: 

The total of these schemes amounts to ₹1,45,980cr. This is on top of ₹51,311 crores which was announced initially.

According to a Press Release by the Press Information Bureau, this scheme is in line with the Prime Minister’s call for 'Atmanirbhar Bharat'. The press release said, "Growth in production and exports of industrial goods will greatly expose the Indian industry to foreign competition and ideas, which will help in improving its capabilities to innovate further.”

Promotion of the manufacturing sector and creation of a conducive manufacturing ecosystem will not only enable integration with global supply chains, but will also establish backward linkages with the MSME sector in the country. This will also benefit the country's youth by enhancing employment opportunities, and will lead to overall growth in the economy.

Related Discussion

.
7 months ago
.
8 months ago
.
8 months ago
.
a year ago

View More