IT Hardware PLI Tenure Likely To Be Extended Amid Chip Shortage: Report

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If the tenure of the scheme is extended by a year, it would in most likelihood be similar to the one for smartphones where the manufacturers would have the option of choosing any four of the five years to avail the incentives

Amid a chip shortage that has crippled several industries around the globe for more than a year, the production-linked incentive (PLI) scheme for IT hardware is likely to be extended by a year as several applicants have pointed out the possible production delay that can be caused by the supply chain disruptions, reported Financial Express.

“Sources said that several of the selected firms have sounded the government that due to supply chain issues and the global shortage of semiconductors, there could be production delays because of which the first year (FY22) incremental production and sales targets could be missed,” read the report.

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Previously, the Centre had also extended the tenure of the PLI scheme for smartphones, amending the rules wherein now the manufacturers would be able to choose any of the four years during the five-year tenure to meet the targets and claim financial incentives.

If the tenure of the scheme is extended by a year, it would in most likelihood be similar to the one for smartphones where the manufacturers would have the option of choosing any four of the five years to avail the incentives.

This is to ensure that if some manufacturers meet the first year (FY22) targets, they get the incentive for that year.

The IT hardware PLI scheme extends incentives between 4 per cent and 1 percent on net incremental sales (over base year i.e. 2019-20) of goods manufactured in India and covered under the target segment, to eligible companies, for a period of four years.

The starting year of the scheme is FY22 so if one year extension is given, the terminating year would be shifted to FY26 against the original FY25.

Though the government is considering giving a one year extension, various industry bodies maintain that the ideal tenure for the scheme should be 8 to 10 years as that much time is needed to create a full manufacturing ecosystem, added the report.

Apart from an extension of tenure, the IT hardware industry is also seeking an increase in incentives for the scheme.

After repeated urges from the industry to increase the outlay for the production-linked incentive (PLI) scheme for IT hardware, the government has finally sought estimates of production, exports and the nature of value addition that result from the expansion of the incentive outlay.

14 companies (4 global and 10 Indian) have been selected for the PLI scheme.

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