India woos telecom gear makers with new incentives

India is trying to lure foreign telecom and networking equipment makers to set up manufacturing units with incentives to cut the nation’s massive dependence on imports

India woos telecom gear makers with new incentives
India, which imports 85% of its wireless telecom equipment is offering incentives for groups that manufacture telecom and networking equipment, in a bid to cut dependence on imports. Photo: Reuters.

(ATF) In yet another effort to attract high-tech manufacturing and cut imports, India on Wednesday approved a new $1.68-billion plan to promote local manufacturing and export of telecoms and networking gear.

The scheme, which will start from April, will offer gear makers annual cash incentives of between 4% and 7% on any increase in sales of locally-made equipment over the next five years, compared with 2019-20 levels.

The offer extends to a wide spectrum of telecom gear, including core transmission equipment, 4G/5G next-generation radio access network and wireless equipment, access and customer premises equipment, devices that can access the Internet of Things, other wireless equipment, and enterprise equipment like switches, routers, and the like.

The plan is part of Prime Minister Narendra Modi’s efforts to make India an electronics production hub and to create jobs. It is also aimed at cutting imports, especially from China.

Already the second largest telecom market, India imports 85% of its wireless telecom equipment, and is trying to roll out fifth-generation – 5G – telecom services that will require telecom operators to make heavy investments in network infrastructure.

Given that India is trying to position itself as a global manufacturing hub, the new incentives could open up many opportunities to manufacturers, according to George Paul, chief executive officer of industry lobby MAIT. Paul said India also expects see companies move their supply chains onshore.

Telecom Minister Ravi Shankar Prasad said the incentive is aimed at reducing the country’s imports of telecom equipment worth over $680 million a year.

“I would appeal to all telecoms’ equipment manufacturers, come on, India is waiting for you with this scheme, we’ll give you all the help,” Prasad said at a news conference.

A global hub

The latest offering is an extension the larger production-linked incentive scheme (PLI) crafted by India last year to attract high-technology manufacturing in the country.

In November, India earmarked $20 billion worth of incentives for 10 industries, including automobile and components, telecom equipment, laptops and personal computers, air conditioners (ACs), and electric batteries, within 45 days.

Earlier this month, while planning the 2021 Budget, Finance Minister Nirmala Sitharaman declared $27 billion worth of benefits (sops) as part of the PLI scheme

While launching the scheme for telecom equipment Prasad said on Wednesday that India is trying to position itself as a global hub for manufacturing and to create a conducive environment for the ease of doing business.

“The PLI scheme that was launched for mobile phones and components manufacturing in April 2020 has been quite successful, following which the government has decided to offer such incentives to the production of telecom parts as well," Prasad said.

Recounting the success of the scheme announced last April, the minister said a top mobile maker could assemble $40 billion worth of devices in India over five years and export them to markets, including the United States and Europe.

“This large company has employed 20,000 people so far and will employ 100,000 directly and 300,000 indirectly by the next year,” Prasad said, without naming the company.

Meanwhile, Foxconn, Wistron and Pegatron, three of Apple’s top manufacturers plan to invest a total of almost $900 million in India over five years to tap into that plan.

India-made iPads?

The government is also preparing to unveil another incentive package to drive local manufacturing of IT products including tablets, laptops and servers, Prasad said.

The new scheme "on the anvil", according to a report by the Economic Times, will have a budget of around $964 million over five years, and is expected to be announced early in March.

Apple assembles the bulk of its iPads in China, but is fast diversifying production to markets such as India and Vietnam to minimise the impact of the US-China trade war and the coronavirus crisis.

India, is reportedly also planning another PLI scheme worth $700 million over five years to boost domestic manufacturing of wearable devices such as smart-watches, sources said. But that news won't be announced till April.

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