The ministry of IT and electronics (MeitY) has sought an additional corpus of $3 billion (about Rs 22,500 crore) to expand the incentives under production-linked (PLI) schemes for IT hardware and wearables & hearables segment in a bid to capture at least 15% of the $350 billion global market by 2026.
“Out of this, about $2 billion is for IT hardware and the balance $1 billion is for wearables and hearables,” a senior government official told.
The official added that the entire calculation was based on the target the country wished to achieve. “We wish to capture at least 15% of the global IT hardware market, out of which electronic hardware would be about $250 billion and wearables and hearables about $100 billion in the next five years… for that, we need additional funds to incentivise companies to come here and set up shop.”
This comes within months of the industry flagging the inadequacy of the current incentive structure to the government. The government, while announcing the policy in February this year, had set an outlay of Rs 7,325 crore to achieve a total production of Rs 3.26 lakh crore.
However, the participants that included the likes of manufacturing majors Dell, Flex, Foxconn and Wistron committed production worth only Rs 1.60 lakh crore, just about half of the target. Industry associations have sought doubling of the incentive rate, which is at present 2.3%, and expanding the corpus to Rs 20,000 crore. Apple, one of the major makers of tablets and laptops, had given this scheme a complete miss.
Officials added that MeitY has sent the proposal to expand the incentives to the empowered group of secretaries.
The empowered group of secretaries, which will take a decision on the matter, comprises the cabinet secretary, the Niti Aayog CEO and secretaries from DPIIT, commerce, revenue, department of economic affairs and MeitY. The group of secretaries has the power to alter the scheme and the rate of incentive. Once ratified, the proposal will then be sent to the cabinet.
Minister of state for IT, Rajeev Chandrasekhar, said, “We have a series of meetings planned to assess progress of various PLIs, to see which ones have more potential and need more inputs”.
He added that MeitY was engaged in a deeply granular assessment to ensure the target of achieving $250 billion worth of electronics production was reached by 2026.
The move comes within days of the cabinet approving Rs 76,000 crore ($10 billion) for creating a semiconductor ecosystem in the country. Adding the $6.6 billion PLI for smartphones launched last year, MeitY itself will have a budget allocation of almost $20 billion over the next five years to make India an electronics manufacturing hub.
Industry bodies such as India Cellular and Electronics Association (ICEA) and the Manufacturers Association for Information & Technology (MAIT), which represent Apple through its contract manufacturer Foxconn, HP, Dell, Intel, Acer, Samsung and Cisco among others have sought a hike in both the rate of incentive as well as the corpus for manufacturing.
The government was about to start a comprehensive review of its ambitious production-linked incentive (PLI) scheme for electronic manufacturing. The review came amid increasing concerns that the already lowered target of $250-$300 billion for local production by 2026 could become tougher to achieve, given the pandemic and policy-related challenges.