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TELECOM ‘PLI’ SCHEME – TO BUILD A STRONG ECOSYSTEM FOR 5G NETWORKS |
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TELECOM ‘PLI’ SCHEME – TO BUILD A STRONG ECOSYSTEM FOR 5G NETWORKS |
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Evolution of Telecom Industry Telecommunications in India began with the introduction of the telegraph. The Indian postal and telecom sectors are one of the world's oldest. In 1850, the first experimental electric telegraph line was started between Calcutta and Diamond Harbor. In 1851, it was opened for the use of the British East India Company. The Posts and Telegraphs department occupied a small corner of the Public Works Department at that time. Later the Department was bifurcated into Department of Posts and Department of Telecom. Despite the technical advantages the cost of calls was very high and common people could not able to reach this service. This scenario has been changed when the liberalization of policy was introduced in India during 1991. The National Telecommunications policy in 1994 which brought changes which include ownership, service and regulation of telecommunications infrastructure. In 1994 the Government opened the telecom sector to private companies. An independent regulator Telecom Regulatory Authority of India was appointed. In 1995, a few months after mobile telephony was opened up to private participation, Essar became the first company to start GSM operations in Delhi under the brand name, Essar Cell phones. In July 21, 1995, then Chief Minister of West Bengal, Jyoti Basu made the first mobile phone call in India. In 2000, the Telecom Infrastructure industry came into existence with Department of Telecom (‘DoT’ for short) inviting applications for IP-I registrations. Prior to that telecom service providers well installing towers and other passive infrastructures on their own and there was no sharing. The telecom tower Industry has played a critical pivotal role in the unhindered growth of India’s telecom sector. It is quite evident that the growth of telecom services could not have been possible without a robust and ubiquitous telecom infrastructure. In 2012 Telecom ministry announced granting of infrastructure status to the telecom tower industry. Once, the telecom was considered as belonging only to the rich people. Due to the technology development and liberalized economy now each and every people have easy access to telecom services since the tariff has been very low when comparing to other public services prevailing in India. Now the phone forms part and parcel of every one’s life. The growth of mobile phones, broadband, internet users is reaching very high. The mobile technology started from 2G, is crawling into 3G, now 4G and 5G in coming future. DoT dash board The DoT Dash Board gives the following statistics on the growth of telecom industry- Table - 1 Telephone subscribers Cumulative Data from 2017 – 18 to 2022 – 2023 (in crores)
Teledensity as on 30.06.2022 = 85.12%; Internet subscribers as on 31.03.2022 = 82.489 crores; Broadband subscribers as on 31.03.2022 = Rs.78.83 crores; Total Telecom towers as on 27.09.2022 = 733787 Wi-Fi hotspots as on 31.07.2022 = 100440. Source: https://dot.dashboard.nic.in/DashboardF.aspx Rolling out of 5G 5G is the fifth generation of cellular networks. The government expects 5G services to be rolled out in the country by October 1, and the Centre will make sure that the prices are affordable for the consumers. Installations are being done and telecom operators are busy with the seamless rollout of 5G services. 13 cities (Ahmadabad, Bangalore, Chandigarh, Chennai, Delhi, Gandhinagar, Gurugram, Hyderabad, Jamnagar, Kolkata, Lucknow, Mumbai and Pune) are likely to get the 5G internet services. The tariffs will be announced soon. DoT had received in August 2022 total bids worth Rs 1.50 lakh crore from the 5G spectrum auction. Apart from high-speed data (up to 10 gigabits per second), 5G also has the potential to enable several enterprise-level solutions such as machine-to-machine communications, connected vehicles, and more immersive augmented reality and metaverse experiences, among others. As per the estimates 5G has the potential to create a cumulative economic impact of $1 trillion in India by 2035. The 5G connections in India are expected to reach nearly 369 million subscribers by 2026. India is expected to have around 10 million active 5G devices in use. PLI Scheme Productivity Linked Scheme (‘PLI’ for short) is an initiative started by the Government of India. It is fiscal subsidy to push ‘Aatma Nirbhar Bharat’ project with the goal of making domestic manufacturing ‘globally competitive’ and ‘global champions’. This subsidy is offered on-
The main aim of this scheme is to invite foreign investors to set up their manufacturing units in India and also promote the local manufacturers to expand their units and generate employment. On 11.11.2020 the Union Cabinet approved the introduction of PLI Scheme on 10 key sectors. The Finance Minister in the Union Budget 2021 indicated the inclusion of 13 more sectors under the PLI Scheme for a period of 5 years and Rs.1.97 lakhs crores have been allocated to this scheme from financial year 2022. The financial outlays allocated to each sector are given in the following table- Table - 2 Approved financial outlays under PLI schemes for 10 sectors for a period of 5 years
Source: https://byjus.com/free-ias-prep/pli-production-linked-incentive-scheme/ Objects of PLI Scheme The object of PLI Scheme is to reduce India’s dependence on China and other foreign countries. It supports labor intensive sectors and aims to increase the employment ratio in India. It also works to reduce down the import bills and boost up domestic production. PLI scheme in Telecom The Department of Telecom notified the PLI Scheme for telecom with effect from 24.02.2021 to boost the domestic manufacturing investments and export in the telecom and networking products and to build a strong ecosystem for 5G, vide Notification No.F.No.13-01/2020-IC, dated 24.02.2021. Guidelines The guidelines for the PLI Scheme have been issued by the DoT, Ministry of Communications on 03.06.2021 and this guideline has been amended on 18.06.2021 and 20.06.2022. Scheme outlay and tenure The overall allocation for this scheme is Rs.12,195 crores. The scheme is available for 5 years. The scheme is effective from 1st April, 2022 from Financial Year 2021-22 to FY 2025-26. The investment will be permitted to be made in made in India from 01.04.2022 onwards and up to Financial Year 2025-2026 only, subject to qualifying incremental annual thresholds. Applicability The scheme is applicable to MSME and Non MSME Company. The Non MSME companies include domestic company and global company. A company is considered as ‘Owned’ by resident Indian citizens if more than 50% of the capital in it is beneficially owned by resident Indian citizens and / or Indian companies, which are ultimately ‘owned’ and ‘controlled’ by resident Indian citizens. Such a company will be defined as ‘Domestic Company’. Global Company is a company which does not qualify as Domestic Company and is having business in one or more than one country either by itself or including its Group Companies. It is estimated that full utilization of the Scheme funds is likely to lead to incremental production of around Rs. 2.4 lakh crores with exports of around Rs. 2 lakh crores over 5 years. It is also expected that Scheme will bring investment of around Rs. 3,000 crore and generate huge direct and indirect employment. Eligibility criteria To become eligible under PLI Scheme the following conditions are to be satisfied for Telecom Networking Products-
The global revenue is Consolidated Gross Revenue. It includes all the revenues in the electronics, IT/ITES including software, telecom and networking segments. The applicants who are declared as Non-Performing Asset as per RBI guidelines or willful defaulter or reported as fraud by any bank, financial institution or non-banking financial company etc. would be considered as ineligible. Further, there should not be any insolvency proceedings admitted against the Applicant in the National Company Law Tribunal. The expenditure incurred on land and building (including factory building / construction) required for the project / unit is not covered under the Scheme and, therefore, will not be considered for determining eligibility under the Scheme. However, expenditure incurred on civil works associated with installation and erection of plant, machinery, equipment, and associated utilities shall be eligible. Expenditure incurred on Research and Development shall be considered as Investment for determining eligibility under the Scheme. Group companies Group Company, as per Scheme Guidelines, means two or more enterprises which, directly or indirectly, are in a position to:
Application fee A non-refundable application fee of Rs. 1,00,000/- would be payable for each application payable by electronic means only. Project Monitoring Agency For this scheme Small Industries Development Bank of India has been appointed as Project Monitoring Agency (‘PMA’ for short). All applications will be submitted online through portal to Project Management Agency. The recommendation on the application for this Scheme shall be made by PMA to DoT in respect of eligible applicants with baseline information (Investments and Sales), committed investments and maximum eligible sales during the Scheme period. On approval by DoT, the PMA shall issue approval letter to the applicants as per specified formats. Target segments The support under this scheme will be provided to the companies which will manufacture specified telecom networking products as detailed below-
Monitoring of the Scheme The Empowered Group of Secretaries (‘EGoS’ for short) will monitor the scheme, undertake periodic reviews of the outgo under the scheme and take appropriate action to ensure that the expenditure is within the prescribed outlay as approved by the Government. The EGoS may revise incentive rates, ceilings, Scheme Target Segment(s) and eligibility criteria as deemed appropriate during the tenure of the Scheme. In case of a force majeure event, the EGoS may amend, modify, or withdraw any clauses under the Scheme Guidelines. Incentive calculation The incentive applicable for an approved Applicant shall be computed as follows: Incentive = Net Incremental Sales of Eligible Product(s) x Rate of Incentive for the applicable year Where-
The applicant shall submit a claim for disbursement of incentive after the end of the financial year to which the claim pertains, but not later than 9 months from the end of the said financial year. The PMA will examine and verify the claim and assess the incentive payable to the applicant. The PMA will make appropriate recommendations to the competent authority. DoT shall disburse funds after completion of all pre-disbursal formalities by the Applicant and approval from Competent Authority. An additional incentive of 1% over and above the applicable rates of incentive for products qualified under Design led manufacturing in each year. Auditor’s certificate The applicant shall submit a Statutory Auditor certificate in respect of the investment towards research and development including cost of technology, IPRs, patents and copy rights, manpower expenses, specifically pertaining to the products approved for manufacturing, in compliance with Scheme Guidelines and subject to the provisions of the Accounting Standard 26, Indian Accounting Standard (IND AS 38 and Income Tax Act, 1961. PLI Dash Board The PLI Dash Board gives the provisional data as on 31.07.2022 in respect of investment, sales and employment. The total investment as on 31.07.2022 is Rs.651 crores the breakup of which is t as below-
The total sales as on 31.07.2022 is Rs.12363 crores the breakup of which is as below-
The employment under this scheme as on 31.07.2022 is 9729 the break up which is as below-
Conclusion The Telecom PLI Scheme is implemented for implementation of 5G scheme in India. India is the second-largest telecommunication market and with telecom services providers moving towards 5G technology and new-age connected equipment, domestic manufacturing will play a pivotal role to set up the digital infrastructure in the country. The scheme proposes to offset large import of telecom equipment worth more than Rs 50,000 crore and reinforce it with made-in-India products. The current scheme is a wonderful opportunity for developing telecom manufacturing in India, a vision that has been unfulfilled for the country and is a key building block of making India ‘Digital’. Government and the industry should partner together to ensure this opportunity is not missed. References:
By: Mr. M. GOVINDARAJAN - November 15, 2022
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