Government Cuts down IT hardware PLI

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India is a fast developing county but has not yet crossed China concerning the manufacturing sector. China dominates other countries in the world as being the largest manufacturing hub. China has 66% of the market share in the manufacturing sector in the year 2019. It is estimated that the global market share for tablets, PCs, and laptops has increased from $229.38 billion in 2018 to $240.99 billion in the year 2019, and is expected that it will become around $220 billion by the year 2025.

The government of India in the union budget 2021-2022 announced the PLI scheme for 13 sectors with an amount of Rs. 12,195 Crores for telecom and networking products. The scheme is set up to provide an incentive of 4% to 1% on net incremental sales to selected companies with 2019-2020 is taken as the base year.

However, recently the government has halved its PLI scheme for IT hardware consists of desktop computers, servers, and laptops because of low bids being received by manufacturers. Therefore the utilization of funds set apart for the scheme will decrease but shipments will be increased.

The IT hardware manufacturers complain about the new incentive structure as it works out an average of 2 to 2.5% for four years and it will not help them to shift the units from Vietnam or China where there are no import duties for the IT goods. The PLI scheme for mobile phones started in August 2020 works out to approximately 4.5% for five years and firms have operated to the maximum limit. The government declared the PLI scheme for the IT hardware sector in February with an amount of Rs 7,350 crore for four years. The government was with the impression that the production will go up to Rs 3.26 lakh crore and exports to reach Rs 3.26 lakh crore. Anyhow in the first week of May, the government has decreased the production target to Rs 1.60 lakh crore and exports to become Rs 60,000 crore.

The aim of the government in announcing the PLI scheme is to boost domestic sales rather than exports. Nineteen companies applied for the scheme, but now it will be beneficial for only those firms which have manufacturing units in India such as Dell and HP.

The statistics show that the import of laptops has increased by 42% during the last five years. On the other hand, India leaning on China is very high as it is found that 87% of imports are from there during the last five years.

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