PLI scheme a signal boost for telecom sector: Crisil

Mumbai (Maharashtra) [India], Aug 18 (ANI): Introduction of the production-linked incentive (PLI) scheme together with enhanced technology support led by adoption of open radio access network (RAN) and investments in 5G telephony is expected to ring in a course reversal for Indian telecom companies (telcos) which have been largely import-dependent and reliant on global vendors for their network roll-outs.
So far, according to Crisil, imports have accounted for 75 to 85 per cent of the total telecom equipment market. While some global vendors have their manufacturing bases in India, majority of equipment has been imported from east Asian countries like China, Malaysia, South Korea and Vietnam.
The nascent domestic equipment industry, on its part, has been catering mainly to public sector undertakings (PSUs).
Crisil said all that is expected to change now with the government extending the PLI scheme to the telecom equipment sector to boost domestic manufacturing and attract investments in the target segments of telecom and networking products.
Under the scheme, 10 MSMEs and 10 non-MSMEs (of which at least three are domestic companies) will be shortlisted on the basis of their investment commitment. The shortlisted companies will then receive incentives for incremental sales generated over the base year, fiscal 2020.
The government has earmarked Rs 12,200 crore for the scheme and expects investments of Rs 3,000 crore with an incentive to capex ratio of 4:1 which is the highest among all PLI schemes.
The fledgling domestic equipment industry missed the last wireless capex boom over fiscals 2016-2021 which saw telcos pump Rs 3 lakh crore to strengthen their 4G networks as they were largely dependent on global vendors for their core, radio and transport network rollouts.
5G networks, however, are expected to see significantly higher investments as they entail at least 70 per cent tower fiberisation levels (30 to 35 per cent presently) and 4 to 20 times higher radio site deployments compared with 4G. This will lead to higher investments in optical and radio networks respectively.
With PLIs covering major telecom equipment, except optical fibers, domestic gear manufacturers can leverage a Rs 50,000 crore market opportunity which is expected to double by fiscal 2025, said Crisil.
It added that the PLI scheme has been timed well ahead of the 5G launch and provides the much-needed policy boost to the domestic telecom manufacturing ecosystem. It has the potential to reduce the share of telecom imports in overall demand to under 50 per cent (from 75 to 85 per cent).
However, it can be constrained by low cap on R&D investments, pricing pressure in the telecom industry and delay in 5G auctions.
Crisil said the scheme is a good starting point for providing the much-needed uptake for the domestic equipment industry.
The need of the hour is to provide a phased manufacturing policy support over an extended period of at least 10 years incentivising high value-adds to create domestic champions in telecom gear manufacturing and make Indian telcos self-reliant. (ANI)