The selected companies have regularly consulted with the Ministry of Electronics and ICT (MeitY) about the modalities for the transition from the existing scheme to the new one.
As the government plans to revise the production-related incentive scheme (PLI) for IT hardware, the companies currently using the scheme want the investments made so far to be secured so that they do not lose out in the transition. no way suffer.
The selected companies have regularly consulted with the Ministry of Electronics and ICT (MeitY) about the modalities for the transition from the existing scheme to the new one. “How people are transferring their investments from PLI 1 to PLI 2 is being discussed by the industry and individual companies. We need to make sure that people who have supported the initiative do not fall victim to the revision,” said a director of one of the companies selected for the scheme.
To make the scheme more attractive, MeitY is working on a revised incentive structure, which may be announced in a few months. The government hopes that with higher incentives, more companies such as Samsung and Apple, which have not participated in the scheme, will come up with production plans in India.
As part of the scheme, which came into effect on April 1 last year, 14 companies (4 global and 10 local) have been selected. To take advantage of incentives, the global companies need to invest Rs 50 crore in the first year and have incremental production worth Rs 1,000 crore. For local companies, the investment amount is Rs 4 crore and the incremental production should be worth Rs 50 crore. The scheme provides incentives for the production of laptops, tablets, all-in-one personal computers (PCs) and servers in the country.
The IT hardware scheme has not been as successful due to its low incentive structure. Companies such as Dell, HP, Acer and others are participating in the program, but that is mainly because these companies have been present in India for a while and already had some production. The scheme failed to attract new companies to produce.
There were problems with the IT hardware scheme from the start. When the government announced the scheme on February 24, 2021, the expenditure was set at Rs 7,350 crore over a four-year period. During this period, the government had estimated production at Rs 3.26 lakh crore, with exports expected to be in the order of Rs 2.45 lakh crore. Later that year, on May 4, when the Center announced the names of the companies that had applied for the scheme, the production target was lowered to Rs 1.60 lakh crore, with exports of which would be in the order of Rs 60,000 crore. amounts.
Since the incentive structure is based on reaching a minimum threshold of incremental sales during the base year to a maximum cap, with companies pledging a lower production target, the expenditure of Rs 7,350 crore was automatically cut in half.
IT hardware manufacturers attribute this to the low incentive structure, which amounts to an average of 2-2.5% over a four-year period, which does not justify moving units from China or Vietnam, especially for hardware products with zero import duties if they fall below Information Technology – I-products.
The mobile phone incentive structure PLI, which became operational in August 2020 and with companies committed to the maximum cap, amounts to about 4.5% over five years.
Industry executives believe that the ideal incentive structure for IT hardware should be between 7% and 8%.
This post IT Hardware Changes PLI: Companies Want to Secure Investments Already Made
was original published at “https://www.financialexpress.com/industry/changes-to-it-hardware-pli-firms-want-to-secure-investments-already-made/2464355/”