THE UNION cabinet Wednesday approved a Rs 7,325-crore production linked incentive (PLI) scheme for laptops, tablets, all-in-one-personal computers, and servers, thereby circling the troika of electronics manufacturing schemes — mobile phones and its allied components, core and peripheral telecom equipment, and now consumer electronics products.
“We have chosen several sunrise sectors where PLI schemes have been started. The PLI is a very simple term. Come to India, invest, set up your factory, manufacture, export and earn incentives. PLI is linked to your manufacturing capability and delivery on the ground,” IT Minister Ravi Shankar Prasad said in a press conference after the Cabinet meeting.
Like other PLI schemes, the incentives for companies in the telecom and networking equipment manufacturing space will flow following the achievement of a minimum threshold of cumulative incremental investment, and incremental sales of manufactured goods, net of taxes.
Consumers in India currently buy laptops worth Rs 30,000 crore a year and tablets worth Rs 3,000 crore a year, of which about 80 per cent is imported. With the new PLI scheme, the government aims to attract the top five laptop and tablet manufacturing companies from across the globe to either set up or expand existing units in India.
These top five large global companies manufacture more than 50 per cent of the total consumer electronic products sold across the world, Prasad said, adding that the scheme would be notified in the next couple of days following which these companies can apply for the scheme.
“Some domestic companies had tried to set up manufacturing units for laptops and tablets in India but could not compete with the global players. Under this new scheme, our estimation is that the total production shall be worth Rs 3.26 lakh core over the next five years, of which about 75 per cent shall be for exports. The value addition done by Indian companies in the IT and hardware sectors would increase to up to 20-25 per cent from 5-10 per cent currently,” Prasad said.
Apart from laptops, tablets, all-in-one personal computers, and servers, the government had earlier launched telecom component manufacturing as well as mobile phone and allied component manufacturing under the PLI scheme. The scheme for telecom components worth Rs 12,195 crore was approved by the Cabinet on February 17, while the government had notified a PLI scheme for mobile phones envisaging incentives worth Rs 41,000 crore over the next five years, in April last year.
Apart from the PLI scheme for laptops and tablets, the Union Cabinet on Wednesday also cleared the PLI scheme for pharmaceuticals which intends to give incentives between 2020-21 and 2028-29.
The decision to allocate Rs 15,000 crore in incentives for boosting self-reliance in the pharmaceuticals sector was first announced after a Cabinet meeting in November 2020. The outlay, which targets three categories of drugs, is in addition to an existing Rs 6,940-crore PLI scheme for over 50 critical key drug ingredients like penicillin G, vitamin B1, dexamethasone and aspirin.
The first category of drugs covered in the latest PLI scheme includes biopharmaceuticals, complex generics, patented and orphan drugs — often expensive for which India relies a lot on multinational drug makers. The second category comprises active pharmaceutical ingredients (APIs), key starting materials (KSMs) and drug intermediates (DIs) — the ingredients that give medicines their therapeutic effect. While the Rs 6,940-crore PLI scheme implemented last year focusses on critical bulk drugs, this scheme is likely to focus on other types of bulk drugs, including complex APIs.
This is relevant from a drug security perspective, as India’s capabilities in APIs have reduced over the years, mostly due to cheaper alternatives from China. The pharmaceutical industry here is currently dependent on the bordering country for nearly 70 per cent of the bulk drugs it imports.
In the wake of the Covid-19 pandemic and the lockdown in China’s Hubei province in the beginning of 2020, the government here had taken various measures, including restricting exports of drug ingredients, to secure its remaining supply of pharmaceuticals.
The rate of incentive for the first two categories will be 10 per cent of incremental sales value for the first four year of the scheme, followed by 8 per cent for the fifth year and 6 per cent for the sixth year of production under the scheme. The third category includes other critical repurposed, auto-immune, anti-cancer, anti-diabetic, anti-retroviral, anti-infective and cardiovascular drugs as well as in-vitro diagnostic devices and drugs not manufactured in India.
The Indian pharma industry has, over the last few decades, mostly developed capabilities in making simple generics — copies of drugs for which patents have expired. Few companies in India are engaged in developing innovative drugs of their own. The rate of incentive for this category will be 5 per cent of incremental sales value for the first four years, 4 per cent for the fifth year and 3 per cent for the sixth year.
Drug manufacturers applying for the scheme will have to be registered in India and will be placed into one of three categories based on their Global Manufacturing Revenue (GMR) — those with a GMR of pharma goods more than or equal to Rs 5,000 crore will be in Group A, while those with a Rs 500 crore to Rs 5,000 crore GMR will be in Group B. Group C applicants will have a GMR of less than Rs 500 crore. “A sub-group for (the) MSME industry will be made within this group, given their specific challenges and circumstances,” a press statement by the Cabinet said.
Around Rs 11,000 crore of the Rs 15,000 crore will be allocated to Group A, Rs 2,250 crore to Group B and Rs 1,750 crore to Group C. The duration of the scheme will be from FY 2020-21 to FY 2028-29, including the period for processing applications, an optional gestation period of one year.
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