The Union Cabinet has approved the second edition of the production linked incentive (PLI 2.0) scheme for IT hardware. with a ₹17,000-crore outlay. This should be weighed in the light of the previous PLI schemes’ outcomes, which did not fully deliver on their promises.

The government expects the scheme will result in additional production worth ₹3.35-lakh crore and investments of ₹2,430 crore during its duration. Furthermore, it aims to create employment opportunities for around 75,000 people within the next six years.

“This is a continuous journey...if you see, in the electronics manufacturing industry today, there are around 25-lakh employees and the way telecom/mobile phone manufacturing, and with today’s announcement on IT hardware, there will be more growth in the employability,” Ashwini Vaishnaw, Minister of Communications and IT, told reporters here after the Cabinet meeting.

The government, in February 2021, approved the first edition of the PLI scheme for IT hardware, with an outlay of ₹7,350 crore, but it failed to evince enough interest among investors.

Higher incentives

The PLI 2.0 scheme comes with a more than double budgetary outlay, a longer tenure of six years (as opposed to four years earlier) and a more attractive incentive package.

“The incentive under the new scheme will be around 5 per cent and can go up to 8 per cent,” Vaishnaw said. This is significantly more than the 1-4 per cent incentive under the first version.

The government’s decision to approve the revised PLI scheme for hardware is important as out of the 14 sectors covered under the scheme, only a handful have managed to deliver encouraging results so far.

An assessment on claims and disbursements carried out by the DPIIT shows that as of March 31, 2023, disbursal of incentives are yet to begin for six sectors including textiles, white goods, automobiles, auto parts, solar PV modules and ACC battery.

Of the ₹2,874.71 crore disbursed under the overall ₹1.97-lakh crore PLI scheme launched in April 2020, as much as ₹1,651 crore has gone to large scale electronics manufacturing, including mobiles, followed by pharmaceuticals at ₹652 crore and food products at ₹486 crore with token amounts going to hardware, bulk drugs, medical devices, telecom products and drones.

The government hopes that with the improved version of the hardware scheme, the performance would be better.

The IT Minister met the stakeholders from electronics manufacturing industry after the 2.0 version roll out and said: “Practically everybody I met, they are happy with the policies in India”. He said major PC makers such as HP, Dell, Acer and Asus who are making high volume products are also happy.

Pankaj Mohindroo, Chairman, India Cellular and Electronics Association, said the revised PLI scheme will “not only foster domestic manufacturing but also likely benefit major global manufacturers of IT hardware products such as laptops and tablets., An industry veteran, requesting anonymity, said the scheme has just been announced and the “real picture will be visible after six months”.