GUIDELINES FOR OPERATIONALISATION OF THE PLI SCHEME

Latest Context

Recently, the Union Cabinet has approved the introduction of the Production-Linked Incentive (PLI) Scheme 2.0 for IT Hardware for enhancing the manufacturing capabilities of India and enhance Exports – Aatm-nirbhar Bharat.                                  

Production-Linked Incentive Scheme 2.0: It was launched in 2020 with the aim to make the domestic manufacturing sector competitive at the global level and creating global champions in manufacturing.

• It is available in 14 manufacturing sectors like food products, textile products, medical devices, pharmaceuticals etc.
• In 2021, the PLI scheme for IT hardware was first notified.
• PLI 2.0 for IT hardware aims at broadening and deepening the IT hardware manufacturing ecosystem in the country.
• Target Segment includes laptops, Tablets, All-in-One PCs, Servers, and Ultra Small Form Factor manufactured in India.
• Semiconductor design, IC manufacturing, and packaging are included as incentivized components of PLI 2.0.

Key Features

• Its objective is to encourage domestic production of IT hardware products like laptops, tablets, all-in-one PCs, servers and ultra-small form factor (USFF) devices, by providing financial incentives to eligible companies on the basis of their incremental sales and investment performance.
• Its scope covers the manufacturing of key components and sub-assemblies like semiconductor design, IC manufacturing, and packaging, that are necessary for developing a robust and competitive IT hardware ecosystem in India.
• For a period of six (6) years, it will offer an average incentive of approximately 5% on net incremental sales (over the base year) of goods manufactured in India and covered under the target segment.
• To provide flexibility and options for applicants and to encourage the localization of the value chain within the country, it has been designed.
• Through this scheme, it is expected that it will generate employment opportunities, boost innovation, enhance exports, and contribute to the overall growth of the IT sector in India.

Significances

• It will increase the competitiveness of India in the global market and increase its share in global IT hardware exports.
• It will help in reducing India's dependence on imports of IT hardware products, which account for a major part of the electronics import bill.
• With backward and forward linkages, and fostering innovation and R&D in this sector, it will encourage the development of a robust IT hardware ecosystem in India.
• Moreover, it will generate additional direct and indirect employment and create a multiplier effect on the economy.

Challenges

• Lack of skilled manpower in addition to quality infrastructure for IT hardware manufacturing.
• Compliance with environmental and safety standards and regulations.
• Protection of intellectual property rights and data security.
• Coping the competition from other countries that offer similar or better incentives and support to IT hardware manufacturers.
• To establish coordination among various stakeholders such as central and state governments, industry associations, academia and research institutions.

Way forward

• For IT hardware manufacturing, formulate a conducive policy environment and simplify the regulatory framework.
• Proffering adequate infrastructure support such as power, water, logistics, connectivity and land.
• Through training and education,  develop a skilled workforce and enhance their capacity.
• Promoting innovation and R&D in IT hardware products and processes.
• Strengthening the domestic demand and creating awareness among consumers about the benefits of buying locally made IT hardware products.

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