Key Players Fuel India’s IT Export Hub Ambitions with Positive Global Response to PLI & PLI 2.0 for IT Hardware

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

This system, which builds on the success of the previous PLI system, includes increased incentives and a more flexible approach to localization. However, according to the government, more than 30 companies have applied for the IT equipment manufacturing PLI scheme, including major global companies such as Foxconn, HP, Dell, Lenovo, Thompson, Acer and Asus.

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

Current PLI system

On March 3, 2021, the Ministry of Electronics and Information Technology (MeitY) had launched an initial PLI program for IT equipment to promote domestic manufacturing and attract significant investments in the sector. The budget allocation for the first phase was Rs 7,350 crore with a tenure of four years (FY2021-22 to FY2024-25). The system offers incentives of approximately 2% of net additional sales in the reference year 2019-20.

Under this system, 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 the system.

About PLI Scheme 2.0

The PLI Scheme 2.0 for IT Hardware, approved by the Union Government on 17 May 2023 and notified on 29 May 2023, is set to take India’s manufacturing capacity and IT hardware sector exports to new heights. The budget allocation for this phase is a whopping Rs 17,000 crore and has been extended for six years.

Under this scheme, the average incentive is about 5% of the net incremental sales of products made in India. The target segment of PLI 2.0 includes laptops, tablets, all-in-ones, servers and ultra-small form factor (USFF). Especially in this system, localization is optional. However, the scheme not only requires companies to assemble IT equipment, but also includes a localization schedule to encourage the production of components such as circuit boards and memory modules, for which participants are entitled to additional incentives.

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

If the applicant falls short of the additional investment target by a certain percentage, the PLI amount to be paid is reduced accordingly, if the deficit is no more than 40%. It was also stated that applicants must meet a specified production threshold, otherwise the incentive will not be granted.

“Furthermore, fines of 5% and 10% of the PLI amount to be paid are imposed if the actual PLI amount claimed for the year is 25-50% less and more than 50% less than the estimated PLI amount. The amount provided by the applicant at the time of application,” it stated In a document from the Ministry of IT.

However, PLI Scheme 2.0 has had a total of 16 applicants, of which two are global companies, five are hybrid entities and nine are domestic companies. This shows the continued interest of both domestic and international players in the Indian IT hardware manufacturing ecosystem.

Delivery status

A positive sign of progress is that payments have already started under the original PLI system for the IT equipment. Bhagwati Products Limited has received Rs.5.30 crore and their payment process has been completed.

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

Global hub

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

As India evolves into an IT hardware manufacturing powerhouse, PLI Scheme 2.0 will play a key role in driving investment, enhancing production and creating employment opportunities, further strengthening India’s position on the global technology manufacturing map.

Vaishnaw said, “The production of PCs, laptops and servers will pick up in the coming months and we will see something similar or better than what has been seen in smartphone exports. India is becoming a reliable supply chain partner and value-added partner and companies will be happy to come to India for manufacturing and engineering. The government is working on many ways to improve electronics manufacturing in the country.”