Rs 12,195 crore increment in PLI scheme to telecom equipment sector by Government

To decrease the India’s imports stood at a high Rs 50,000 crore as of now, and to enhance the growth of Micro, Small and Medium Enterprises (MSMEs) by boosting Made in India products, the Union Cabinet increased the Rs 12,195 crore Production Linked Incentive (PLI) scheme to the telecom equipment sector on February 17.

Notifying the scheme, Ravi Shankar Prasad Telecom Minister said: “As a result of PLI scheme for telecom equipment, government hopes to have incremental production of Rs 2,44,200 crore in the sector, exports worth Rs 1,95,360 crore, 40,000 new jobs, and Rs 17,000 crore worth of tax revenue in the coming five years.”

It is expected that Foreign Direct Investment (FDI) will be increased to Rs 3,000 crore; the scheme will be applicable with respect from April 1, 2021. It will include main transmission equipment, Internet of Things (IoT) access devices, enterprise equipment such as switches and router, 4G/5G next-generation radio access network and wireless equipment, and access and customer premise equipment (CPE).

The businesses achieving a minimum threshold of cumulative incremental investment and incremental sales of manufactured goods net of taxes from 2019-20 onwards will be eligible for the scheme.

It is a word of the government that investors will be incentivised up to 20 times of the minimum investment threshold, once a business is qualified for the scheme. The incentives will be provided to the firms up to 6 per cent of their initial investment over the first two years after their investment, up to 5 per cent till the fourth year, and four per cent investment in the fifth year. For MSMEs, one percent higher incentive has been announced in year 1, year 2 and year 3.

The scheme has been fitted for larger participation from MSMEs otherwise as well, with small businesses being allowed to invest in more than one product category to meet the government’s minimum investment and sales criteria. The minimum investment threshold for MSME has also been determined lower at Rs 10 crore; whereas, for larger entities it remains Rs 100 crore. The greater involvement of Indian MSMEs in the sector is also driven by New Delhi's worries over security risks. The government has made it clear multiple times that the sensitive nature of network equipment necessitated domestic production by Indian businesses.

Concluding the existing PLI scheme for cell phone manufacturing, Prasad said: “Rs. 34,000 crore worth of investments have been made in the country till now. Without taking names, he said that a major company has ramped up their hiring to 20,000 people currently, with plans to make 40,000 mobile phones in the next 5 years, 90 per cent of which will be exported to the United States and European Union.”

Referring to China, the minister also added “the government has been successful in bringing to India 14 factories from a neighboring nation. In the immediate aftermath of the COVID-19 pandemic, the government had outlined plans to seize foreign investments leaving China as a result of global geopolitical anger aimed at Beijing.”