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Laptop and tablet manufacturers have written to the electronics ministry to increase sops under the production-linked incentive (PLI) scheme for IT hardware to be able to compete against the likes of Vietnam.
India Cellular and Electronics Association of India (ICEA), which represents the likes of HP, Dell, Lenovo, Acer and contract manufacturers Foxconn, Flextronics, Wistron etc, has written to the government last week that we must aim for at least 25% of the global market which stands at $240 billion currently.
“With the current promised output, we are not even able to fulfil the demand of the domestic market,” said Pankaj Mohindroo, chairman, ICEA. “For the incentives to be worthwhile, we must attract at least 25% of global manufacturing to India. For instance, the mobile phone PLI, with a package of Rs40,000 crores, has made us the second largest producer of handsets in the world,” he said.
A top executive of an Indian electronics manufacturing company said that today, some 87% of laptops and tablets are imported from China and companies need to build the ecosystem from scratch in India.
Thus, the government must hike the “meagre” financial outlay of Rs 7350 crore for the scheme and redefine the low incentive structure for companies to be able to overcome disabilities of local manufacturing and make a business case for exports from India, the executive added.
The PLI scheme offers a 1%-4% reward and does not compensate for the disabilities of shifting production to India of duty-free products like laptops, tablets and data servers from countries like China, Taiwan and Vietnam, say industry executives.
As a result, the scheme received a poor response with the 14 companies approved under the scheme cumulatively committing to produce far lower than expected by the government.
They have pledged to produce goods only up to the minimum eligibility threshold or goods worth Rs 1.60 lakh crore, including Rs 60,000 crore of exports over the 4-year period of the scheme. This is sharply lower than the government’s estimate of achieving production output worth Rs 3.26 lakh crore, of which exports were expected to be worth Rs 2.45 lakh crore.
“As US and Vietnam are embroiled in a tariff war and the latter is dealing with a massive Covid wave, it is an opportune moment for India to wean away IT hardware manufacturing which is highly concentrated in the southeast Asian nation,” Mohindroo said, pushing the need for higher incentives.
Last week, the government okayed five global companies including Dell, ICT (Wistron), Flextronics and Rising Stars Hi-Tech (Foxconn) to produce Laptops, Tablets, All-in-One Personal Computers (PCs) and Servers.
Under the domestic category, 10 companies namely Lava International Limited, Dixon Technologies (India) Limited, Infopower Technologies (JV of Sahasra and MiTAC), Bhagwati (Micromax) Neolync, Optiemus, Netweb, Smile Electronics, VVDN and Panache Digilife have been approved.