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The Centre’s efforts to boost domestic manufacturing and enhance India’s position as a global manufacturing hub for IT hardware have received a significant upgrade with the launch of the Production-Linked Incentive (PLI) Scheme 2.0 for IT Hardware as many companies, including global and domestic, have shown interests.

This scheme, which is built on the success of the previous PLI scheme, comes with increased incentives and a more flexible approach to localisation. However, according to the government, more than 30 companies have applied for the PLI Scheme for IT Hardware Manufacturing, which includes prominent global companies such as Foxconn, HP, Dell, Lenovo, Thompson, Acer and Asus.

Union IT Minister Ashwini Vaishnaw had said the government has received “excellent response” for the production of laptops and PCs under the PLI scheme. “We have met almost all the 32 companies who applied”, and the portal was closed on August 30.

Existing PLI Scheme

The Ministry of Electronics and Information Technology (MeitY) had launched the initial PLI Scheme for IT Hardware in March 3, 2021 to promote domestic manufacturing and attract substantial investments in the sector. The first phase had a budget allocation of Rs 7,350 crore and a four-year tenure (FY2021-22 to FY2024-25). The scheme offers about 2% incentives on net incremental sales over the base year of FY2019-20.

Under this scheme, the target IT hardware segments included laptops, tablets, all-in-one personal computers (PCs), and servers. Local production was mandatory, and companies had to meet investment and production thresholds to qualify for incentives. Four global companies and 10 domestic companies applied for this scheme.

About PLI Scheme 2.0

The PLI Scheme 2.0 for IT Hardware, approved by the Union cabinet on May 17, 2023, and notified on May 29, 2023, is set to take India’s manufacturing capabilities and exports in the IT hardware sector to new heights. The budget allocation for this phase stands at a staggering Rs 17,000 crore, with an extended tenure of six years.

Under this scheme, the average incentive is around 5% on net incremental sales of goods manufactured in India. The target segment under PLI 2.0 includes laptops, tablets, all-in-one PCs, servers and ultra-small form factor (USFF). Notably, under this scheme, localisation is optional. However, the scheme does not only ask businesses to assemble IT hardware items but it also contains a localisation timetable to encourage the production of components such as printed circuit boards and memory modules, for which participants will be eligible for further incentives.

PLI 2.0 is expected to attract investments of Rs 2,430 crore, resulting in a total production value of Rs 3.35 lakh crore and generating nearly 75,000 direct jobs. However, there are strict provisions in place to ensure that companies meet their investment and production targets.

If an applicant falls short of the incremental investment target by a certain percentage, their payable PLI amount will be reduced proportionally, provided the shortfall is not more than 40%. Additionally, it was also stated that applicants need to achieve the prescribed production threshold else no incentive will be awarded.

“In addition, there will be provisions for penalties of 5% and 10% from the payable PLI amount if the actual PLI amount claimed for a year is less by 25%-50% and less by more than 50% respectively from the estimated PLI amount given by the applicant at the time of application,” noted an IT ministry document.

However, Under the PLI Scheme 2.0, there have been a total of 16 applicants, which includes two global companies, five hybrid entities, and nine domestic companies. This demonstrates a continued interest from both domestic and international players in India’s IT hardware manufacturing ecosystem.

Distribution Status

In a positive sign of progress, disbursements have already commenced under the initial PLI scheme for IT Hardware. Bhagwati Products Limited has received Rs 5.30 crore, and their disbursement process has been completed.

Meanwhile, Dell International Services is awaiting approval from the competent authority for their Rs 49.62 crore disbursement. Netweb Technologies, with a disbursement request of Rs 4 crore, is currently under evaluation by the Project Management Agency (PMA), M/s IFCI Ltd.

Global Hub

According to the government data and officials, India’s efforts to position itself as a trusted supply chain partner for global IT majors are gaining momentum. The country’s thriving IT services industry, coupled with strong domestic demand, is attracting large IT hardware companies to set up manufacturing facilities in India. The goal is not only to serve the domestic market but also to leverage India as an export hub.

As India continues to evolve into a manufacturing powerhouse for IT hardware, the PLI Scheme 2.0 is set to play a pivotal role in driving investments, boosting production, and creating job opportunities, further solidifying India’s status on the global technology manufacturing map.

Vaishnaw said: “Production of PCs, laptops, and servers will increase in months to come and we will see something similar or better than what has been seen in smartphone export. India is emerging as a trusted supply chain partner and value-added partner and companies are happy to come to India for manufacturing and design. The government is working on multiple ways to improve electronics manufacturing in the country.”