India's Department of Telecommunications (DoT) has finally issued guidelines on the implementation of the Production Linked Incentive (PLI) scheme to spur domestic telecom equipment manufacturing.

The government will approve ten applications each in MSME and non-MSME categories. Out of these, at least three applications in the MSME segment need to be domestic firms. The firms will be shortlisted based on the criteria of committed investment over the scheme period.

"The PLI scheme will be implemented within the overall financial limit of INR121.950 billion ($1674.59 mn) for implementation of the scheme over a period of five years. For MSME [Micro, Small and Medium Enterprises] category, financial allocation will be INR10 billion ($137.3 mn)," says the statement issued by the company.

Figure 1: Speak up: The guidelines on India's PLI scheme have finally been released – two months into the application window.
(Source: Shreyans Bhansali on Flickr CC 2.0)

According to the guidelines, interested companies will have to invest a minimum of INR100 million ($1.37 million) in the case of MSME, and INR1000 million ($13.7 million) for non-MSME firms.

Land and building cost will not be considered as an investment under the PLI scheme. However, 15% of research and development investment will be counted. The application window is open for a month until July 3, 2021, only.

Signing up

Several companies have shown interest in participating in the scheme. For example, media reports suggest that Nokia and HFCL will be investing. Both these companies already have manufacturing units in India.

Samsung, Ericsson, Ciena, Cisco and Foxconn are among others that have shown interest. Added to this, Bharti has also signed a joint venture with Dixon for the manufacturing of telecom products.

The DoT was supposed to come up with the guidelines in the beginning of April. However, the plans eventually arrived two months after the start of the scheme.

The PLI scheme is likely to promote the production of gear worth INR2440 billion ($33.5 billion) and also contribute to creating employment. It is likely to bring in investments worth INR30 billion ($411.94 million).

Essentially, the government will provide financial incentives worth between 4% and 6% of sales over five years. The scheme is launched to "boost domestic manufacturing investments and export in the telecom and networking products."

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The PLI initiative is in line with the Atmanirbhar Bharat (Self-reliant India) initiative of the Indian government. A series of measures have made it challenging for Chinese vendors Huawei and ZTE to do business in India. They were also barred from the recently approved 5G trials. The PLI scheme is designed to boost domestic manufacturers, which can plug the gap left by the Chinese gear makers.

The scheme was initially launched only for mobile devices and the electronics sector, and played a crucial role in increasing electronics manufacturing. Now it is likely to spur growth for the domestic telecom manufacturers as well.

The scheme covers core transmission gear, Radio Access Networks, Internet of Things access devices, switches and routers, among other telecom equipment.

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— Gagandeep Kaur, contributing editor, special to Light Reading