PLI Scheme for Telecom: A Revival Plan for Growth

Govt's Production Linked Incentive (PLI) scheme for the manufacturing of large-scale electronics, in April 2020. Telecom is a priority sector in this plan. Here is a brief analysis by SMEStreet on the opportunity of PLI in the Telecom Sector for MSMEs.

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COVID-19 pandemic hit the world economy last year, apart from health crisis, the whole world including India started facing an unprecedented economic crisis. Then started the great Indian economic revival action plan and we all witnessed the introduction of ‘Atmanirbhar Bharat' plan.  Prime Minister Narendra Modi and his leadership policymakers came together and pointed out the only way forward for India, was through local industries. The plan included a focused approach towards job creation, and most importantly product creations. To create jobs and get rid of India’s unemployment plague it is imperative that the domestic manufacturing sector came under prime focus.

Govt's Production Linked Incentive (PLI) scheme for the manufacturing of large-scale electronics, in April 2020. In November 2020, the PLI scheme was extended to 10 other sectors — chief among them were food processing, battery storage, food processing, telecom, automobile components and speciality steel. Under this scheme, companies would be rewarded for increasing their output with respect to a defined base year. The PLI scheme has a simple framework — a reward for increased production.

In this writeup, we are focusing on PLI in the Telecom sector which is India's flagship industry vertical specially in the last two decades.

The Department of Telecommunications (DoT) issued guidelines on the implementation of production-linked incentive (PLI) schemes for manufacturers in the sector.

"With the objective to boost domestic manufacturing, investments and export in the telecom and networking products Department of Telecommunications (DoT) notified the “Production Linked Incentive (PLI) Scheme" on 24th February 2021. Now, after extensive consultations with stakeholders, the operational guidelines for the scheme have been issued on 3 June," according to an official statement from the Ministry of Communications and IT.

The scheme envisages creating global champions out of India who has the potential to grow in size and scale using cutting edge technology and thereby penetrate the global value chains. Telecom products play an important role in the larger vision of “Digital India". Telecom sector is the backbone of India's flagship Digital India program. The sector also have a strong representation of MSMEs which were hit mostly during the Pandemic era.

"The PLI Scheme will be implemented within the overall financial limits of  12,195 Crores only (Rupees Twelve Thousand One Hundred and Ninety-Five Crore only) for implementation of the Scheme over a period of 5 years. For MSME category, financial allocation will be 1000 Crores,"the statement further said. Small Industries Development Bank of India (SIDBI) has been appointed as the Project Management Agency (PMA) for the PLI scheme.

The scheme will be effective from 1st April, 2021. The investment made by successful applicants in India from 1st April, 2021 onwards and up to Financial Year (FY) 2024-2025 shall be eligible, subject to qualifying incremental annual thresholds. The support under the Scheme shall be provided for a period of five (5) years, i.e. from FY 2021-22 to FY 2025-26.

The Scheme is open to both MSME and Non-MSME Companies including Domestic and Global Companies. Also, manufacturers with products with Indian technology are encouraged to apply.

Interested eligible Applicants can start the registration process for the Scheme at . The Application window shall be open till 3rd July 2021.

Applicants will have to satisfy the minimum revenue criteria to be eligible under the Scheme. The Company may decide to invest in single or multiple eligible products. The Scheme stipulates a minimum investment threshold of  10 Crores for MSME and  100 Crores for non-MSME applicants. Land and building costs will not be counted as investments. Eligibility shall be further subject to Incremental Sales of Manufactured Goods (covered under Scheme Target Segments) over the base year (FY2019-20).

The Department of Telecommunications shall grant approvals to 10 (ten) eligible applications each in MSME & non-MSME categories. Out of the 10 applications in non-MSME category, at least 3 (three) Applicants will be eligible Domestic companies. The applications will be shortlisted from highest to lowest on the basis of committed cumulative incremental investment during the Scheme period.

The DoT notified the PLI scheme for telecom and networking products on February 24, 2021, with a financial outlay of 12,195 crores, over five years.

The scheme for telecom gear manufacturing in India which is expected to encourage the production of equipment worth 2.44 lakh crore and create direct and indirect employment for about 40,000 people.

The investor can earn incentives for incremental sales up to 20 times the committed investment enabling them to reach global scales and utilise their unused capacity and ramp up production.

Reference: LIVEMINT

MSMEs in the Telecom sector considers this as an opportunity to explore but there is a common expectation that it would have been better if the scheme is further expanded and increased in terms of coverage. Micro sector enterprises definitely need a more lucrative action plan which may incentivise their contributions in the telecom sector and the program can motivate them to do better in the tough times of economic recovery.

However, the crisis is big, but like some wise people have already said that change is inevitable and the only constant, so MSMEs are also hoping that this time will change and a new era of opportunities and success will emerge from here. Govt's action plan is aimed to deliver great value in this time, but MSMEs possess a common agenda of 'Dill Maangay More'.


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