DoT introduces design linked incentive scheme, extends telecom gear PLI by a year

The department of telecommunications (DoT) on Monday extended the production-linked incentive (PLI) scheme for telecom equipment manufacturing by a year while also amending the scheme to facilitate design-led manufacturing. Companies can apply for design-led manufacturing, with incentives worth Rs 4,000 crore, from June 21.

The telecom PLI scheme, with an outlay of Rs 12,195 crore was notified last year, under which 31 global and local companies were selected to undertake incremental production worth Rs 1.82 trillion over five years. But since the outlay was not utilised fully, the design-led manufacturing has been incorporated into the PLI scheme. The DoT will give an option to companies selected under telecom PLI to also apply for design-led manufacturing, which gives 1% higher incentive. But in order to get selected, the companies have to design locally and register the source code in India. Since, most of the global firms don’t have their source code here, Indian companies may stand to benefit more.

The DoT has extended the telecom PLI scheme by one year as many medium and small firms are yet to submit their investment plans and have not met the production targets for the current fiscal year. With the extension, the existing PLI beneficiaries will be given an option to choose financial year 2021-22 or financial year 2022-23 as the first year of incentive. Although the scheme has been extended to six years, firms can get incentives for five years as was originally planned. Those companies which have met the targets can take the incentives in 2021-22 while the others can take it from next year onwards.

The DoT has also approved addition of 11 new telecom and networking products to the existing list. Notable companies selected under the scheme include Flextronics, Foxconn, Jabil, Nokia, Rising Star, Dixon Technologies, VVDN Technologies, Tejas Networks, HFCL, ITI, Coral Telecom and Lekha Wireless, among others. The scheme offers incentives between 4% and 7% for different categories and tenures. For the MSMEs, a 1% higher incentive is proposed in year 1, year 2 and year 3. Financial year 2019-20 will be treated as the base year for computation of cumulative incremental sales of manufactured goods net of taxes.

For design-led manufacturing, incentives will be given for five years, commencing from April 1, 2022. With the objective to build a strong ecosystem for 5G, the Union Budget 2022-23 had proposed to launch a scheme for design-led manufacturing. The scheme is open to both MSME and non-MSME companies including domestic and global companies. The applications from design-led manufacturers shall be prioritised over other manufacturers while shortlisting. The design-led manufacturing is primarily aimed to support efforts for designing telecom products in India. It will recognise and encourage R&D-driven manufacturing in the country to enhance its contribution to global value chain as envisaged in the National Digital Communication Policy, 2018.

The scheme stipulates a minimum investment threshold of `10 crore for MSME and Rs 100 crore for non-MSME applicants. Land and building cost will not be counted as investment. Eligibility shall be further subject to incremental sales of manufactured goods over the base year (FY 2019-20). The allocation for MSME has been enhanced from Rs 1,000 crore to Rs 2,500 crore.