The Union government is preparing to introduce a new production-linked incentive (PLI) scheme to strengthen domestic telecom equipment manufacturing. As the existing telecom PLI scheme progresses into its second phase, the government is exploring measures to enhance its impact. The proposed initiative will focus on non-electronic components such as plastic parts (casings, connectors, covers), fibers, antennas, and related accessories. Industry experts emphasize that increasing domestic production of telecom components is not only vital for value addition in telecom gear but also crucial for national security.
Two Models for the Proposed PLI Scheme
The new PLI scheme outlines two alternative models to drive localization. The first model links incentives to a mandatory localization requirement for electro-mechanical, plastic, and optical components. Under this scheme, progressive localization targets will be set—starting with 30% in the second year, 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 exclusively sourced from India, with a localization timeline of two to five years. For 4G/5G radio access network (RAN) radios, the government has defined phased localization targets—plastic and rubber parts 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.
Consultations with industry stakeholders indicate a preference for the percentage-based bill of materials (BOM) localization model. Companies currently eligible for the existing telecom PLI scheme—including those manufacturing telecom customer premises equipment (CPE)—will be able to apply for this initiative. The Department of Telecommunications (DoT) has identified five key product categories for incentives under this scheme: 4G/5G RAN (radios and baseband units), network switches, Gigabit Passive Optical Network-Optical Network Terminals (GPON ONT), Wi-Fi access points, and CPE such as internet set-top boxes.
Expanding PLI to Telecom Components
India’s push for self-reliance in telecom manufacturing began with the original PLI scheme in April 2021, which 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, and Tejas have participated in the initiative. Indian-made telecom equipment is now being exported to North America and Europe, serving top global telecom firms.
Government data suggests the PLI scheme has significantly reduced India’s telecom import dependence, achieving a 60% import substitution rate. The country is now nearly self-sufficient in manufacturing critical components such as antennas, GPON, and CPE.
Challenges in Telecom Manufacturing and Localization
Despite progress, localization remains a challenge. The ongoing PLI scheme for telecom products covers 42 eligible firms with a budget of ₹12,195 crore, and these firms have invested over ₹3,718 crore so far. However, localization levels vary significantly across different telecom products—switches have only 3% localized BOM, GPON ONT has 12%, and 4G/5G RAN and internet set-top boxes stand at just 4%. This highlights the need for targeted localization strategies.
The Telecom Regulatory Authority of India (TRAI) recently emphasized the importance of promoting domestic telecom equipment manufacturing. Despite the PLI scheme, producing telecom hardware in China remains 12-13% cheaper than in India, giving Chinese firms a competitive pricing advantage in the global market.
Trade Imbalance in India’s Telecom Sector
In FY24, India’s telecom sector faced a severe trade imbalance, with imports exceeding exports by a factor of seven. According to DoT data, telecom product imports surpassed ₹1,46,000 crore, while exports stood at just ₹20,000 crore. Telecom exports have been declining for three consecutive years, dropping from over ₹60,000 crore in FY22—when the PLI scheme was introduced—to just a third of that amount.
India also struggles with limited availability of advanced semiconductor components essential for telecom equipment manufacturing. Despite growth in domestic production, the country remains heavily dependent on imports for critical semiconductor components used in 5G, IoT, and other next-generation telecom technologies.
The Need for R&D and a Skilled Workforce
The DoT is currently working on key aspects of the new PLI scheme, including eligibility criteria and the total financial outlay required. The scheme is expected to align with the upcoming PLI for electronic components, which is awaiting Cabinet approval, with ₹25,000 crore earmarked for incentives. Additionally, telecom equipment manufacturers have approached the Ministry of Electronics and Information Technology (MeitY) to ensure that their electronic component requirements are included under this initiative.
Apart from financial incentives, India must prioritize research and development (R&D) in emerging telecom technologies such as 5G, 6G, and beyond. Strengthening workforce training programs and incentivizing private sector investments in advanced manufacturing facilities are also essential. China’s heavy investment in R&D has led to the rise of globally competitive telecom firms, and India must adopt a similar strategy to bridge existing gaps.
Conclusion: A Game-Changer for India’s Telecom Industry
The introduction of a component-specific PLI scheme could be a game-changer for India’s telecom industry. By addressing localization challenges and reducing import dependence, the initiative has the potential to make India a more competitive player in global telecom markets. However, for the scheme to be successful, it must be complemented by strong R&D investments, workforce skill development, and strategic policies that make Indian telecom manufacturing cost-competitive on a global scale.
