PLI Scheme for IT Hardware

Syllabus:  GS- III, Economy; GS-II, Polity and Governance;

Context: As part of its renewed PLI scheme for IT hardware, the Centre has received applications from 38 entities (Asus, Dell, HP, Foxconn, etc., excluding Apple), that want to manufacture laptops, personal computers and servers in India..

Synopsis:

• Apart from Asus, Dell, HP and Foxconn, other companies that have applied for the scheme include Lenovo, Acer, and Flex, which is said to be manufacturing Reliance’s JioBook laptop.
  • HP Enterprises (HPE) has also applied for manufacturing servers in India.
• While the expected incremental production at the end of six years of the scheme is estimated at Rs 3.35 lakh crore, it could bring an incremental investment of just Rs 4,000 crore over these many years.
• The government estimates the manufacturing process to result in 75,000 direct jobs [could touch 2 lakhs when accounted for indirect jobs].

Significance:

• It is a significant scale up in technology, both
  • in terms of the optimisation of its PHWR design — the new 700MWe unit addresses the excess thermal margins (thermal margin refers to the extent to which the operating temperature of the reactor is below its maximum operating temperature) —
  • and also marks an improvement in the economies-of-scale, without significant design changes to the 540 MWe reactor.

What is the Production Linked Incentive (PLI) Scheme?

• A cornerstone of the Government’s push for achieving an Atmanirbhar Bharat, the objective of the PLI Schemes is to
  • Make domestic manufacturing globally competitive
  • Create global Championsin manufacturing and
  • Generate employment opportunities for the country’s youth.
• The strategy behind the scheme is to offer companies incentives on incremental salesfrom products manufactured in India, over the base year.
• They have been specifically designed to
  • Boost domestic manufacturing in sunrise and strategic sectors,
  • Curb cheaper imports and reduce import bills,
  • Improve cost competitiveness of domestically manufactured goods, and
  • Enhance domestic capacity and exports.

• The first three PLI Schemes were approved earlier in March, 2020and these were followed by another 10 New PLI Schemes in November, 2020.
• The Union Budget 2021-22, announced an outlay of INR 1.97 Lakh Crores for the PLI Schemes for 13 key sectors.
  • This means that minimum production in India as a result of PLI Schemes is expected to be over US$ 500 billion in 5 years.

 What is the PLI scheme for IT Hardware?

• It was first announced in February 2021 with an initial outlay of around Rs 7,300 crore over a period of four years.
• Domestic players investing Rs 20 crore and clocking sales of Rs 50 crore in the 1st year, Rs 100 crore in the 2nd, Rs 200 crore in the 3rd, and Rs 300 crore in the final year, would pocket incentives of 1-4% on incremental sales over 2019-20.
• The first version of the scheme was a laggardwith only two companies – Dell and Bhagwati – managing to meet first year’s (FY22) targets, and the industry calling for a renewed scheme with an increased budgetary outlay.
• As a result, the Union Cabinet cleareda revised PLI scheme for IT hardware (in May, 2023) with an outlay of Rs 17,000 crore, more than doubling the budget for the scheme.
  • The PLI 2.0 could attract big global IT hardware manufacturers to shift their production base to India and give a boost to local production of laptops, servers, personal computers, etc.
  • The average incentiveover six years will be about 5% compared with the 2% over four years offered earlier.
• As the IT hardware industry is targeted to reach a production of $24 billion by 2025-26 (and exports ~$12-17 billion), this scheme will play a key role in achieving the $1 trillion digital economy goal, including $300 billion of electronics manufacturing by 2025-26.

How will the PLI Scheme Boost Local Production in India?

• Even as the country has identified electronics manufacturing as a key sector for future economic growth,India has seen an increase in imports of electronic goods in the last few years.
• For example,the import of electronic goods increased to $6.96 billion (during April-June this year) from $4.73 billion in the year-ago period, with a share of 4-7% in overall imports.
• The highest share of importsis in the category of personal computers including laptops, and palmtops.
  • China accounts for roughly 70-80% of the share of India’s imports of personal computers, laptops.
• Companies that locally manufacture certain components including memory modules, display panels, etc., will also get additional incentives under the restructured scheme.
• The PLI scheme seeks to penalise companiesif production lags behind the set thresholds, by deducting as much as 10% from the subsidies.
• The PLI scheme will interplay with the semiconductor scheme of the government, with chips made in India and being used by laptop manufacturers.