In a move to propel the implementation of the production-linked incentive scheme for IT hardware, the Ministry of Electronics and IT (MeitY) has proposed to relax the various parameters including allowing companies the flexibility to claim incentives even if they make lower than committed investments. The revised scheme may also allow hardware manufacturers to include the investments made by their suppliers to claim the incentive.
Top sources close to MeitY told businessline that the Centre is willing to allow up to 40 per cent flexibility in meeting the investment standards set by the government, with a 20 per cent reduction in incentive payout. For example, if a company was supposed to invest ₹100 crore to claim the incentive now, it can invest ₹60 crore and claim 20 per cent lower incentive compared to the original scheme.
In addition, MeitY is also proposing to pay the full incentive if the company covers the shortfall in subsequent years. “If the company covers up the shortfall in investment for a particular year in the subsequent year, it can claim the full incentive the following year,” the source said.
Also read: PLI for IT servers and hardware on the anvil: Rajeev Chandrasekhar
These concessions come at a time when global IT players such as HP, Lenovo, Apple, Asus and Acer have been in discussion with the government to shape IT PLI 2.0 more favourably. The initial version of the IT PLI has launched nearly two years ago in 2021. However, it received a lukewarm response with investments of only about ₹123 crore as of June 2022, far short of the ₹2,500-crore investments expected by the Centre.
Talks for further concessions are still ongoing at the moment as the Centre has still not acquiesced to remove the investment requirement altogether, and delink it from incentives, as asked by the IT hardware makers.
sop for localisation
The incentive for localisation has also been increased with additional incentive between 0.75 per cent and 1.65 per cent “The incentive on localisation has been made very attractive. For example, if a company does display assembly locally, they will get an additional incentive of 1.65 per cent on a complete laptop,” source said.
The incentive duration for the scheme has also increased from four years to six years, and the duration of the PLI scheme has also increased to eight years.
The source further added that in lieu of the demands of American tech giants such as Dell, HP and Apple the investment criteria has also been widened. Now, the investment by suppliers will also be counted in the investment of the PLI applicant.
Limited participation
Limited participation by global IT companies in the hardware PLI scheme is because of a multitude of reasons. According to the companies, there is no impetus to increase capacity in India, as demand for PCs and tablets continues to remain muted. Some in the industry want the revised scheme to be delayed until demand picks up. However, top sources said the government may reduce the incentive scheme if the hardware companies are unable to meet targets even after giving these relaxations. “There is a view that the allocation for IT hardware can be better used for PLI scheme for some other sector which is meeting the investment targets,” said an industry source.