The Department of Telecom has launched an incentive scheme for design-led manufacturers and extended the duration of the Rs. 12,195 crores production-linked incentive (PLI) scheme by a year, an official statement said on Monday.
The incentive for design-led manufacturing is part of the PLI scheme, which was notified on February 24, 2021. The DoT has amended the clause and made the scheme effective from April 1, 2022.
“To build a strong ecosystem for 5G, the Union Budget 2022-23 has proposed to launch a scheme for design-led manufacturing as part of the existing PLI scheme. After consultations with stakeholders, the guidelines for the PLI Scheme for telecom and networking products have been amended to introduce Design-led Manufacturing with additional incentive rates,” the statement said.
Telecom equipment makers who use 50 percent of Made in India components in their products will be eligible for the design-linked incentive.
The new telecom PLI version heeded domestic manufacturers’ demand by removing the 15 percent cap on investment to be made for research and development.
The PLI has a provision to provide incentives in the range of four to seven percent. The design-led manufacturers will get an additional one percent incentive over existing slabs under the PLI scheme.
The application window will open from June 21 till July 20. The incentives will be given from the Rs. 4,000 crores left from the total outlay.
“Further, based on feedback from stakeholders, including the selected PLI applicants, DoT has decided to extend the existing PLI Scheme by one year. The existing PLI beneficiaries can choose the financial year 2021-22 or 2022-23 as the first year of incentive.”
“DoT has also approved the addition of 11 new telecom and networking products to the existing list, based on suggestions from the stakeholders,” the statement added.
The Department of Telecom (DoT) notified the PLI scheme on February 24 last year, for which a total of 31 companies, including Nokia, Foxconn, Akashastha Technologies, ITI, and HFCL Group, were approved on October 14. The approved companies have committed to making total investments of Rs. 3,345 crores by 2025-26.
The companies interested in the incentive scheme must satisfy the minimum global revenue criteria to be eligible. The company may decide to invest in single or multiple eligible products.
The scheme stipulates a minimum investment threshold of Rs. 10 crores for MSMEs and Rs. 100 crores for non-MSME applicants.
Land and building costs will not be counted as investments under the scheme. The allocation for MSME has been enhanced from Rs. 1,000 crores to Rs. 2,500 crores.
“The modification made in the scheme for R&D, adding new products like Open RAN (radio access network) and satellite communication equipment and extending the scheme by one year indicates the government’s intent to incrementally incentivize India-led R&D, focus on newer technologies and deeper and widespread manufacturing in India,” EY India partner Kunal Chaudhary said.
The scheme for telecom gear manufacturing in India is expected to encourage the production of equipment worth Rs. 2.5 lakh crore and create direct and indirect employment for about 40,000 people.
The investors can earn an incentive for incremental sales up to 20 times the committed investment, enabling them to reach global scales, utilize their unused capacity, and ramp up production.
Industry body ICEA’s Chairman Pankaj Mohindroo said the decisions of the DoT would not only go a long way in supporting Indian entrepreneurs but also ensure that India consolidates its position in the global value chain (GVC) of the electronics and mobile phone industry.
“The industry could not have expected a better time for this announcement as the geopolitical tensions have impacted the global supply chain after the severe hit of the pandemic. Further, the timing of the decisions also gains significance as the country has already taken a major step forward in telecom with the Union Cabinet approving the 5G spectrum auctions,” Mohindroo said.
