How Samsung and 20 others missed out on an ambitious incentives scheme
Jatin Grover The telecom products manufacturing scheme was expected to generate incentives claims of more than ₹ 12,000 crore. But that's not how it turned out. Top manufacturers such Samsung, HFCL Ltd, Netweb Technologies, Kaynes International, Optiemus unit GDN Enterprises and state-owned ITI Ltd have not claimed any incentives yet.
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An ambitious scheme to boost local telecom manufacturing is still far from its target, four years after the government set aside ₹ 12,000 crore to get companies to build everything from network gear to set-top boxes. While beneficiaries of the scheme have sold goods worth over ₹ 80,000 crore during the period, incentive claims are still a fraction of the originalallocation.
An ambitious scheme to boost local telecom manufacturing is still far from its target, four years after the government set aside ₹ 12,000 crore to get companies to build everything from network gear to set-top boxes. While beneficiaries of the scheme have sold goods worth over ₹ 80,000 crore during the period, incentive claims are still a fraction of the originalallocation.
Top manufacturers such Samsung, HFCL Ltd, Netweb Technologies, Kaynes International, Optiemus unit GDN Enterprises and state-owned ITI Ltd have not claimed any incentives yet, as they either failed to start manufacturing or were unable to meet targets. The result: only a tenth of the incentives have been claimed by manufacturers so far.
A Right To Information (RTI) request found that the scheme disbursed ₹ 1,162.04 crore by the end of FY25, against the ₹ 12,195 crore approved for five years. While 42 companies were shortlisted, only half claimed incentives. The scheme was introduced in February 2021 to incentivize the local manufacture of equipment such as network switches, transmission gear and set-top boxes.
According to industry executives, the reasons include weak order book and demand, competition within the segment and the inability to meet set targets of investments and sales. 'Missed opportunity'
'The reason why many players missed the opportunity is owing to the market structure compared to that of smartphone PLI," a consultant who works with companies said. Telecom PLI serves the B2B market where the companies already have fixed clients, while the more successful smartphone PLI serves the B2C market, the consultant said on the condition of anonymity.
The smartphone PLI scheme has been among the government's most successful ones. On 17 April, electronics and IT minister Ashwini Vaishnaw said in a post on X that in FY25, smartphone exports reached a record ₹ 2 trillion. Exports grew 55% in FY25.
The telecom PLI scheme offers incentives of 4-7% of the incremental sales over the years. In the first, second and third years, MSMEs get a 1% higher incentive.
'Samsung has not started production and is meeting the equipment supplies to Indian telcos from imports," an industry executive aware of the matter said. The company did not respond to a query. HFCL's plan
In February, domestic gear maker HFCL had said it expects to start claiming PLI incentives from FY26.
PLI amount, we have still not been able to claim because…the amount of revenue we thought would come from telecom equipment, which will make PLI available to us would not be fulfilled during the current financial year. So, we expect to start claiming PLI from the next financial year," Mahendra Nahata, promoter and managing director of HFCL told analysts during an earnings call in February.
'If at all we are able to claim, this (PLI incentive) should be around ₹ 40-50 crore," Nahata added. On 1 November 2022, HFCL had said it would invest around ₹ 425 crore towards the development and manufacture of various eligible products under the PLI scheme. The company had said it was granted approval to avail of incentives up to ₹ 652.79 crore as part of the government's production-linked incentive (PLI) scheme from FY23 to FY27.
Companies approved under the scheme were allowed to choose a period of five consecutive years either from FY22 to FY26, or FY23 to FY27, to achieve the net incremental sales.
Queries sent to the Union communications ministry which administers the scheme, as well as HFCL, Kaynes, Samsung, Optiemus, Netweb Technologies and ITI remained unanswered. 'Successful'
A government official, however, claimed the scheme was successful.
'The targets are set by the firms themselves. If they have not claimed any incentives, they may not have met the sales or investment target. Despite that, they have contributed to the overall sales and exports of telecom equipment," the official said on the condition of anonymity, adding the government steadily disburses the amounts.
The ministry's PLI dashboard showed that the beneficiaries under the telecom scheme have invested ₹ 4,139 crore and generated sales of ₹ 80,927 crore as of March end. The companies have generated a cumulative employment of 26,345.
Tata Group company Tejas Networks, which designs and manufactures telecom equipment, won incentives of ₹ 345.27 crore for FY23, FY24, and FY25 so far, the highest among all the companies, the RTI document showed. The company has gained from BSNL's 4G rollout order, and also exports its products to 75 countries.
Jabil Circuit India, which contract-manufactures for Ericsson and Apple, was the second in the list, claiming incentives of ₹ 236 crore, the RTI document showed. Right strategies
Contract manufacturers such as Flextronics Technologies India, Foxconn's Rising Stars Hi-Tech and Syrma SGS, got incentives of ₹ 90.31 crore, ₹ 80.33 crore, and ₹ 53.3 crore, respectively. VVDN Technologies and Dixon Electro Appliances received incentives of ₹ 48 crore and ₹ 34.8 crore so far, according to the document.
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'The success under the PLI scheme also depended on the right sales and investment strategies, which most medium-size companies have been able to meet. The government gave the companies a free hand to decide on the targets which, maybe, were overestimated by some companies," said Paritosh Prajapati, chief executive officer and founder of Sweden-based GX Group. The company is manufacturing routers, switches and other telecom equipment under the scheme in India and has received incentives of ₹ 20.9 crore.
Prajapati said the focus will now shift to exports as companies have set up domestic bases. Exports
By the end of FY25, total exports under the telecom PLI scheme were at ₹ 14,838 crore. Nokia Solutions and Networks India exported equipment worth ₹ 4,487 crore, followed by Jabil at ₹ 4,356 crore.
Nokia, so far, has been able to get incentives of only ₹ 47 crore under the scheme. The company supplies 4G/5G equipment to telecom operators in the country and globally.
US-based Commscope, which provides network infrastructure solutions, exported telecom equipment worth ₹ 2,882 crore under the scheme. Domestic players such as VVDN Technologies exported products worth ₹ 1,293 crore, followed by Syrma SGS at ₹ 583 crore and Tejas at ₹ 420 crore.
Sanmina-Sci India, a subsidiary of US-based Sanmina Corp., exported ₹ 384 crore worth of telecom equipment. Notably, Jio is currently manufacturing its devices in India under Reliance Industries' joint venture with Sanmina.
The Department of Telecommunications (DoT) had notified the PLI scheme for telecom and networking products in February 2021 with an outlay of ₹ 12,195 crore. The incentives for eligible companies were in the range of 4-7% based on incremental sales of telecom and networking products manufactured. For MSMEs, a 1% higher incentive was there in year 1, year 2 and year 3 of the scheme.
In June 2022, the government amended the scheme to facilitate design-led manufacturing with an additional incentive rate of 1% over and above the existing incentive rates. A sum of ₹ 4,000 crore from the ₹ 12,195 crore was set aside for the same.
The government also extended the tenure of the scheme from five years (FY22 to FY26) to 6 years (FY22 to FY27).
Companies approved under the scheme were allowed to choose a period of five consecutive years either from FY22 to FY26, or FY23 to FY27, to achieve the net incremental sales for the incentive claim. Investments, however, are allowed till FY25 or FY26 depending on the base year chosen by the companies. The extension was given as many companies failed to achieve their production targets due to covid-related supply chain disruptions when the scheme came into effect. Topics You May Be Interested In
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