IT hardware industry body the Manufacturers’ Association of Information Technology (MAIT) is in talks with the government seeking to increase incentives being offered under the Production Linked Incentive (PLI) scheme for IT hardware and an extension in the timelines to achieve the PLI targets.
While the discussions with the government have been on for the past three-four months, the industry body is expected to send its detailed recommendations for the same over the next two weeks.
MAIT, which represents top companies including Dell, Apple, HP, Lenovo to name a few, is seeking an increase in current incentives offered to the tune of 5-10 per cent of the incremental sales.
According to George Paul, CEO, MAIT, currently the companies will be offered a sort of cash back of around 4 per cent in the first year of production on a targeted net incremental sale of around ₹1,000 crore for international manufacturers and ₹50 crore for local companies. This, on average over the planned period of four years of availing incentives comes down to a net 2.3 per cent incentives on sales.
PLI timeline
Additionally, MAIT will also request for an extension for the PLI timeline from current four years, to six years for PC manufacturing and eight years for server manufacturing, to make shifting large-scale manufacturing of IT hardware to India viable.
Paul said, “For the disability gap which PLI is trying to solve, the percentages of the incentives need to be increased. At the current percentage, it is not viable to manufacture in India. And after the initial few years, in the subsequent years this will become totally unviable.”
“We also need to build the sub assemblies in India. The components or sub-assembly supplies needed to build the hardware, we have to bring in these companies under PLI scheme too over a period of time, and that needs a longer duration. Four years is not sufficient,” he added.
As per media reports, only three companies namely Dell, Micromax and Dixon Technologies are on track to achieve the production targets set for first year of the PLI scheme, rest of the 11 participants are still in a limbo.
Manufacturing for these companies involve a combination outsourcing several parts or components from electronics manufacturing services (EMS) companies and local companies. Paul believes for the entire ecosystem to develop, it has to be grounds up. He expects component manufacturers too to come under the fold of similar incentives eventually.
“Lower incentives make it extremely difficult for manufacturers to shift from other countries like China where they get higher incentives. In the case of servers, the disabilities are even higher because volumes are much lower,” he said.
Demand for servers
However, servers will soon see a surge in demand in India, Paul said. With India’s digital economy developing and the need for digital infrastructure to cater the same, demand for servers will thrive. 5G network once in place will need large numbers of servers and so will Big Techs and other foreign entities as protection laws come into place requiring them to set up data centres in India abiding to data localisation norms.
“We are still at a latent stage of production, that’s why implementation and ramping up of IT hardware manufacturing needs to be faster. Else, by the time 5G and other developments come in place, we will be compelled to import servers and devices,” Paul said.