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India Approves Production Incentive Scheme for IT Hardware

The Union Cabinet led by Prime Minister Narendra Modi has approved the Production-Linked Incentive (PLI) Scheme 2.0 for IT Hardware for Enhancing India’s Manufacturing Capabilities and Enhancing Exports under the Atmanirbhar Bharat (Self-Reliant India) scheme.

The notification for the scheme was on 29 May and the window for applications under the PLI Scheme 2.0 for IT Hardware opened on 1 June. The scheme will extend an average incentive of around 5% on net incremental sales (over a base year) of goods manufactured in India and covered under the target segment, to eligible companies, for six years. The scheme aims to facilitate large-scale manufacturing in laptops, tablets, all-in-one PCs, servers, and ultra-small form factor (USFF) devices. It is expected to make a substantial contribution towards achieving an electronics manufacturing turnover of approximately US$ 300 billion by 2025-26.

The PLI Scheme 2.0 for IT Hardware is expected to contribute to the expansion and strengthening of the manufacturing ecosystem by promoting the localisation of components and sub-assemblies. Moreover, the scheme allows for a longer timeframe to develop the domestic supply chain, fostering its growth within the country.

The scheme offers enhanced flexibility and choices for applicants, and it is linked to incremental sales and investment thresholds, providing further incentives for growth. Additionally, semiconductor design, IC manufacturing, and packaging are also included as incentivised components of the PLI Scheme 2.0 for IT Hardware.

The PLI Scheme 2.0 for IT Hardware has been approved with a budgetary allocation of IN 17,000 crores (approximately US$ 2 billion), more than doubling the budget for the scheme that was first cleared in 2021 to incentivise and promote domestic manufacturing by attracting large investments in the value chain. It will be implemented from 1 July with a cap on maximum incentives available to participating companies. The scheme is expected to lead to a total production of about IN 3.35 trillion (US$ 40 billion), bring an additional investment of IN 24.3 billion (US$ 284 million) in electronics manufacturing, and will lead to the generation of 75,000 additional direct jobs.

Applicants who have already been approved under the existing PLI Scheme will have the opportunity to apply for the PLI 2.0 scheme as well. The scheme categorises applicants into three categories: global companies, hybrid companies (a combination of global and domestic companies), and domestic companies.

The Union Minister of State for Skill Development and Entrepreneurship and Electronics and IT, Rajeev Chandrasekhar, delivered a keynote address at a Digital India Dialogues session in Bengaluru on the scheme. The event witnessed the participation of various stakeholders from the technology ecosystem, including industry experts, representatives from industry associations, and startups.

The PLI scheme aims to enhance the competitiveness of Indian manufacturers by attracting investments in cutting-edge technology, fostering efficiencies and economies of scale, and promoting exports. In November 2020, the government set up PLIs for 10 sectors, which included the manufacturing of High-Efficiency Solar PV Modules and Advanced Chemistry Cell (ACC) Battery.

In September 2021, additional amounts were allocated under the scheme, particularly for the automobile industry. The focus was specifically on incentivising the manufacturing of electric and hydrogen-based vehicles. The policy also has a digitalisation component and seeks to enhance the production of electronic products within India.

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