Boosting telecom manufacturing with PLI: The Union government is planning to launch of a new production-linked incentive scheme to strengthen local manufacturing of telecom equipment. As the existing telecom PLI scheme enters its second phase, the government is exploring ways to enhance its impact. The proposed scheme will target non-electronic components such as plastic parts (casings, connectors, covers), fibres, antennas, and related accessories.
Boosting the domestic production of telecom components is not only essential for increasing value addition in telecom gear but also crucial from a national security perspective, say industry insiders.
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Two models for proposed PLI scheme
Under the proposed PLI scheme, two alternative models have been outlined to drive localisation. The first option involves linking incentives to a mandatory localisation requirement for electro-mechanical, plastic, and optical components. The scheme would set progressive localisation targets, starting with 30% localisation for non-electronic bill of materials in the second year, increasing to 50% in the third year, 70% in the fourth year, and reaching 90% by the fifth year.
The second model proposes an annual list of specific components that must be sourced exclusively from within India, with a localisation timeline of two to five years. In the context of 4G/5G radio access network (RAN) radios, the government has defined specific localisation targets. Plastic and rubber parts must be localised by the second year, metal parts by the third year, antennas by the fourth year, and RF filters, connectors, and cables (both optical and electrical) by the fifth year.
However, consultations with industry stakeholders indicate a preference for the percentage-based BOM localisation model. Companies currently eligible for the existing PLI scheme for telecom equipment and related products, including telecom customer premises equipment (CPE), will be able to apply for this new initiative.
The department of telecommunications has identified five key products for incentives under this scheme. These include 4G/5G RAN, which covers both radios and baseband units. Network switches are also part of the scheme, as they form a critical component of telecom infrastructure. Gigabit Passive Optical Network-Optical Network Terminals (GPON ONT), essential for high-speed broadband connectivity, are another priority. Additionally, Wi-Fi access points and customer premises equipment (CPE) such as internet set-top boxes will also receive incentives to enhance domestic manufacturing.
A case for expanding PLI to telecom components
India’s push for self-reliance in the telecom sector began with the launch of the original PLI scheme in April 2021. This scheme targeted core transmission equipment, 4G/5G RAN and wireless equipment, IoT access devices, and enterprise equipment. Leading companies such as Samsung, Dixon Technologies, HFCL, Jabil, Flextronics, Rising Star, Nokia, and Tejas have participated in this initiative. Indian-made telecom equipment is now being exported to North America and Europe, catering to some of the world’s top telecom firms.
According to government data, the PLI scheme has significantly reduced India’s reliance on telecom imports, achieving a 60% import substitution rate. India has become nearly self-sufficient in producing critical components such as antennas, GPON, and CPE.
Telecom manufacturing and localisation challenges
Despite progress, localisation remains a challenge. The ongoing PLI scheme for telecom products has 42 eligible firms and a budget of Rs 12,195 crore. To date, these firms have invested over Rs 3,718 crore. However, localisation levels vary across different telecom products. Switches have only 3% localised BOM, GPON ONT has 12%, while 4G/5G RAN and internet set-top boxes stand at 4%. The need for targeted localisation measures is evident.
Additionally, a recent recommendation from the Telecom Regulatory Authority of India emphasised the importance of promoting domestic networking and telecom equipment manufacturing. TRAI pointed out that despite the PLI scheme, manufacturing telecom hardware in China remains 12-13% cheaper than in India. The cost advantage enables China to offer finished products at lower prices, making India less competitive in the global market.
Trade imbalance in India’s telecom sector
In FY24, India’s telecom sector faced a significant trade imbalance, with imports exceeding exports by a factor of seven. Data from the DoT shows that telecom product imports surpassed Rs 1,46,000 crore, while exports stood at approximately Rs 20,000 crore. India’s telecom exports have been declining for three consecutive years, dropping from over Rs 60,000 crore in FY22—when the PLI scheme was introduced—to just a third of that amount.
India also struggles with the limited availability of advanced semiconductor components required for telecom equipment manufacturing. Despite growing domestic manufacturing capabilities, there is still a heavy reliance on imports for critical components such as semiconductors, which are essential for 5G, IoT, and other next-generation telecom technologies.
The need for R&D and skilled workforce
The DoT is currently deliberating on key aspects of the new PLI scheme, including eligibility criteria and the total financial corpus required. The scheme is expected to align with the upcoming PLI for electronic components, which is awaiting Cabinet approval. A total of Rs 25,000 crore has been earmarked for incentives. In addition, telecom equipment manufacturers have approached the ministry of electronics and information technology to ensure their electronic component requirements are included under this initiative.
Apart from financial incentives, India must prioritise research and development in cutting-edge telecom technologies such as 5G, 6G, and beyond. A stronger focus on skilling the workforce through advanced training programs and incentivising private sector investments in state-of-the-art manufacturing facilities is also crucial. China’s heavy investments in R&D have led to technological advancements and the rise of globally competitive firms. India must adopt a similar approach to bridge existing gaps and build a robust domestic telecom manufacturing ecosystem.
The introduction of a component-specific PLI scheme could be a game-changer for India’s telecom industry. By addressing localisation challenges and reducing import dependence, the initiative has the potential to enhance India’s competitiveness in global telecom markets. However, for the scheme to succeed, it must be complemented by robust R&D investments, skilled workforce development, and strategic policy interventions that make Indian telecom manufacturing cost-competitive on a global scale.