The Union Cabinet has recently greenlit the Production-Linked Incentive (PLI) scheme for the telecom sector. With a substantial outlay of Rs. 12,195 crores spread across five years, this scheme is part of a larger initiative to bolster domestic manufacturing and reduce import bills.
Understanding the PLI Scheme
The central government introduced the PLI scheme in March 2020, intending to incentivize companies based on incremental sales from products manufactured domestically. Besides attracting foreign companies to initiate operations in India, the scheme also motivates local businesses to establish or develop existing manufacturing units. The government has approved the PLI scheme for a diverse range of sectors including electronic products, IT hardware, pharmaceuticals, automobiles and their components.
PLI Scheme for the Telecom Sector: An Overview
Targeted explicitly at promoting domestic manufacturing of telecom and networking products such as switches, routers, 4G/5G radio access network, wireless equipment and Internet of Things (IoT) access devices, the PLI scheme for the Telecom sector will become active starting April 1st, 2021.
Eligibility Criteria for the PLI Scheme
To qualify for the scheme, companies must meet a minimum threshold of cumulative incremental investment and incremental sales of manufactured goods. The cumulative investment can be made in one go, provided that the prescribed annual cumulative threshold for four years is met. The base year for computation of cumulative incremental sales of manufactured goods, net of taxes, is 2019-20.
Incentives Offered under the PLI Scheme
Investors who meet the criteria of the scheme can enjoy incentives up to 20 times the minimum investment threshold, allowing them to make use of their unused capacity. Special higher incentives have been provided for Micro, Small and Medium Enterprises (MSMEs). For MSMEs, the minimum investment threshold is Rs. 10 crore, compared to Rs. 100 crore for other businesses. Additionally, MSMEs are proposed to receive a 1% higher incentive in the first three years.
Significance of the PLI Scheme
The scheme is poised to result in an incremental production of around Rs. 2.4 lakh crore, with exports amounting to approximately Rs. 2 lakh crore over five years. It is also anticipated to draw in investments exceeding Rs. 3,000 crore. Further, this initiative is expected to create 40,000 direct and indirect job opportunities and generate tax revenue of Rs. 17,000 crore from telecom equipment manufacturing. The PLI scheme is a significant step towards India’s path to self-reliance, considering that currently, India imports over 80% of its telecom and wireless networking equipment.
