India Encourages Design-Led Manufacturing of 5G Products with Amended PLI Scheme
India has amended its PLI scheme for telecom and networking products to include design-led manufacturing of 5G products. The expanded scheme will invite applications for design-led manufacturing from June 21, 2022 till July 20, 2022. Additionally, the new PLI scheme offers more incentives for MSMEs.
To facilitate design-led manufacturing of 5G products in India under the Production Linked Incentive (PLI) Scheme for Telecom and Networking Products, the federal government has amended the existing PLI scheme to extend its scope as well as timeline. The new amendments to the scheme, which were notified by the Department of Telecommunications (DoT) on June 20, 2021, have been instituted based on a proposal for the same in the Union Budget 2022. The objective is to build a strong ecosystem for 5G in India.
Earlier in February 2021, DoT had notified the PLI scheme for the telecom sector with a total outlay of INR 121.95 billion. In October 2021, a total of 31 companies, comprising 16 MSMEs and 15 non-MSMEs, including eight domestic and seven global companies, were approved as beneficiaries.
When can companies apply for the amended PLI scheme for telecom and networking products?
The application window is open from June 21, 2022 till July 20, 2022. The investments can be made in the scheme’s target segments under the following categories:
- Plant, machinery, equipment, and associated utilities
- Research and development (R&D)
- Transfer of technology agreements
The incentives will be funded from the remaining amount of the PLI scheme’s total outlay of INR 121.95 billion, that is INR 40 billion.
What are the changes in the amended PLI scheme for telecom and networking products?
Extension of timeline
Based on feedback from stakeholders, including the selected PLI applicants, the base year for the calculation of incentives for the PLI scheme on telecom equipment has been extended by one year. The applicants can now choose between financial year (FY) 2021-22 and FY 2022-23 as the first year of incentive. Earlier, FY 2019-20 was fixed as the base year.
New design-led manufacturing scheme under the PLI scheme for telecom and networking products
The government has opened applications for design-led manufacturing under the PLI scheme for telecom sector. This is mainly intended to support efforts for designing telecom products in India. It will recognize and encourage R&D driven manufacturing to augment the sector’s contribution to the global value chain as directed by the National Digital Communication Policy, 2018.
As per the amended scheme, eligible applicants can avail incentives for five years starting from April 1, 2022 up to FY 2025-26, subject to qualifying incremental annual thresholds. Additionally, the DoT has specified that applications for design-led manufacturing will be given preference over other manufacturers in the shortlisting process.
The design-led manufacturing scheme is open for both medium and small-scale enterprises (MSMEs) and non-MSMEs, including domestic and global companies. While the investment threshold has been fixed at INR 100 million for MSMEs, non-MSMEs require a minimum investment of INR 1000 million. Investors must note that land and building cost will not be counted as investment.
Incentives based on incremental sales
The incentives will be based on incremental sales of the manufactured goods, ranging between four to seven percent for different categories over the years. MSMEs will get an additional incentive of one percent in the first, second, and third years.
Changes to expenditure incurred on R&D
The amended policy includes the expenditure incurred on manpower in the capital expenditure incurred on R&D. Earlier these manpower expenses were excluded.
Changes made to expenditure related to transfer of technology clause
To incorporate the new design-led manufacturing scheme in the existing PLI telecom umbrella, this expenditure shall also include cost of technology and any technology purchase related to goods covered under the scheme’s target segments through government labs, academic institutions within India, C-DOT, or DSIR registered R&D entities.
Additionally, the expenditure cap of five percent of the total committed investment on transfer of technology earlier has now been eliminated.
Increased allocation for MSMEs
The maximum financial allocation for MSMEs over five years has been increased from INR 10 billion earlier to INR 25 billion under the amended scheme.
Approval for 11 new products
The DoT has also added 11 new telecom and network products to the existing list of products that can be manufactured under the PLI scheme. The additions have been made to the following categories:
- Core transmission equipment: Millimeter radio, E/V-band radios, satellite gateway equipment (hub/earth station), free space optics communications equipment
- 4G/5G, next Generation radio access network, and wireless equipment: telecom antenna, open-RAN equipment (radio unit, distributed unit, centralized unit and RAN intelligent controller)
- Access and customer premises equipment (CPE), IoT access devices: Internet set top box, satellite CPEs for accessing internet, VSAT equipment, NG-PON-ONT, telecom modules of IoT/M2M access devices
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