Comments
Majority of IT hardware players are set to meet their targets under the second edition for the production linked incentive scheme (PLI 2.0) by March 2024.
This is a significant improvement to the earlier version of the scheme, where only two out of the 14 applicants met the first-year targets, and many big players such as Samsung did not apply.
Double budgetary outlay
In May 2023, the Cabinet approved the new version of the subsidy scheme. Doubling the outlay to ₹17,000 crore. The new scheme not only came with double budgetary outlay, but a longer tenure of six years (as opposed to four years earlier) and a more attractive incentive package.
As a result, around 38 companies have applied for this version of the production-linked incentive scheme, with the scheme being more flexible in its current iteration, allowing applicants to choose between 2023, 2024, and 2025 as the base year. Many global players such as HP, Dell, Lenovo and Foxconn as well as local makers Dixon Technologies applied under the scheme. Apple, however, chose to not apply under the 2.0 version of the scheme as well, choosing to only localise smartphone production to India.
For the most part, it appears that the majority of the applicants started production under the 2.0 from 2023 itself, something that the government alluded to while announcing the number of applicants. However, government sources told businessline that some of the laptop producers like HP will only start producing IT hardware under the scheme by 2025. Dixon, which is making IT hardware for Lenovo and Acer, will also start production next year.
The revised scheme extends an average incentive of around 5 per cent – more than double the 2 per cent incentive offered in the previous version – to make laptops, tablets, all-in-one PCs, servers and ultra small form factors in India. The new scheme also has added flexibilities in both the tenure and investments for participants, such as allowing them to pick the base year for production.
IT hardware such as laptops and PCs does not have a robust consumer market in India in the same manner as smartphones. According to IDC data, the country shipped 146 million smartphones in 2023 versus 13.6 million PC units in the same year. This explains why localisation schemes for smartphones have been much more successful than for IT hardware so far. Even as exports for smartphones grow, for the most part firms localising under subsidy schemes are largely producing for Indian consumers only.
Poor sops for localisation
Limited consumption in India for IT hardware thus provides poor incentives for localisation. Even as demand for IT products started to grow after the pandemic, a recent report by IDC found that the traditional PC market de-grew in India by 6.6 per cent at 13.9 million shipments, this is after the Centre’s import curbs in 2023 pushed the sale of more PCs in India. However, the Indian subsidy scheme hopes to push top firms, especially Dell, HP, and Lenovo to localise production to the country to make it an export hub in particular. At the moment, other South East nations such as Vietnam and Taiwan enjoy the stage of being export hubs for IT hardware.
Speaking to businessline, Bharath Shenoy, Analyst at IDC, said, “All the top vendors, except Apple, have kickstarted their local assembly of PCs in India under PLI 2.0. This is expected to not just reduce the dependency on imports from China, but also to set base for large scale manufacturing of PCs which might eventually lead to exports to other countries. This is also expected to generate around many jobs (direct+indirect ) which will further give momentum to government’s ‘Make in India’ initiative.”
Comments
COMMENT NOW
