DoT introduces a design-related incentive scheme, extending the telecommunications PLI by one year

The Telecommunications Department (DoT) on Monday extended the Production Incentive Scheme (PLI) for the production of telecommunications equipment by one year, while changing the scheme to facilitate design-led production. Companies can apply for design-led production with incentives worth Rs 4,000 from June 21st.

The PLI scheme for telecommunications with a cost of 12,195 rupees was notified last year, according to which 31 global and local companies were selected to undertake additional production worth 1.82 trillion rupees in five years. However, as the costs were not fully recovered, the design-led production was included in the PLI scheme. DoT will also allow companies selected by the telecommunications PLI to apply for design-driven manufacturing, which gives a 1% higher incentive. But to be selected, companies must design locally and register the source code in India. Since most of the global companies do not have their source code here, Indian companies can benefit more.

DoT has extended the PLI telecommunications scheme by one year, as many medium and small companies have not yet submitted their investment plans and have not met their production targets for the current fiscal year. With the extension of the existing PLI beneficiaries, they will be given the opportunity to choose the financial year 2021-22 or the financial year 2022-23 as the first year of incentive. Although the scheme has been extended to six years, companies can receive incentives for five years, as originally planned. Those companies that have achieved the goals can take the incentives in 2021-22, while others can take it from next year onwards.

DoT also approved the addition of 11 new telecommunications and networking products to the existing list. Well-known 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 mandates. For SMEs, a higher incentive is offered by 1% in year 1, year 2 and year 3. The financial year 2019-20 will be treated as a base year for calculating cumulative increasing sales of industrial goods without taxes.

Incentives for design-led production will be provided for five years from 1 April 2022. In order to build a strong 5G ecosystem, the Union budget for 2022-2023 has proposed the launch of a design-led production scheme. The scheme is open to both SMEs and non-SMEs, including local and global companies. Applications from design-driven manufacturers should take precedence over other manufacturers as they are selected. Design-driven manufacturing is primarily focused on supporting telecommunications product design efforts in India. It will recognize and encourage R&D-oriented production in the country to increase its contribution to the global value chain, as envisaged in the 2018 National Digital Communication Policy.

The scheme provides a minimum investment threshold of 10 kroner for MSME and Rs 100 kroner for non-MSME applicants. Land and construction costs will not be considered an investment. Eligibility further depends on additional sales of manufactured goods during the base year (2019-2020 financial year). The distribution for MSME has been increased from Rs 1,000 crore to Rs 2,500 crore.

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