Beyond assembly: how India's next telecom PLI wants to build the supply chain from within

Summary

The existing telecom PLI scheme, launched in February 2021, incentivizes local production of network switches, transmission gear, and set-top boxes over a five-year period ending as late as FY27. However, the scheme has seen uneven adoption.

India is weighing a new production-linked incentives (PLI) scheme to promote telecom equipment manufacturing that will succeed the current scheme ending in March, two people aware of the plans said. While the existing scheme of ₹12,195 crore focuses primarily on final product assembly, the new one worth ₹6,000- ₹7,000 crore will aim to go deeper into component manufacturing.

The Union finance ministry is reviewing a proposal submitted by the Department of Telecommunications for the new scheme, the people said on the condition of anonymity. The proposed five-year plan aims to create 9,000 direct jobs, drive ₹3 trillion in sales, and generate ₹1.5 trillion in additional exports, they added.

"A final decision on the proposal will be made soon," said one of the people.

Unveiled in 2020 with an outlay of ₹1.91 trillion, India's 14 PLI schemes covering key sectors including electronics, telecom, auto and pharmaceuticals together attracted investments of ₹2.4 trillion as of March 2026, according to a commerce ministry statement. These schemes created, both directly and indirectly, employment opportunities for over 1.4 million people and generated additional exports of ₹15.2 trillion.

Spokespersons for the finance ministry and the telecommunications ministry did not respond to emailed queries.

Negotiations

Government officials have already held industry consultations to shape the next iteration of the scheme. Since India has designated telecom as critical national infrastructure, the move aligns with the government's push to build resilient domestic supply chains amid geopolitical volatility.

"The next phase should focus on deeper domestic value addition, component localization, research and development, Indian intellectual property and strengthening India as a global telecom manufacturing and export hub," said Paritosh Prajapati, chief executive officer and founder of Sweden-based GX Group, which manufactures routers and switches in India under the existing scheme.

"The new scheme should go deeper into the supply chain where R&D is one or the main missing area, supporting the ongoing localisation of semiconductors, optical/photonics components, printed circuit boards (PCBs) and other critical components, while continuing to incentivize exports," Prajapati said.

Mixed track record

The current telecom PLI scheme, launched in February 2021, incentivizes local production of network switches, transmission gear, and set-top boxes over a five-year period ending as late as FY27. However, the scheme has seen uneven adoption -- of the 42 approved applicants, 19 have failed to claim or receive any incentives, according to government data presented in parliament on 29 January.

While local companies and global contract manufacturers like Tejas Networks Ltd, VVDN Technologies, Nokia Solutions and Networks India Pvt. Ltd, Jabil Circuit India Pvt. Ltd, Flextronics Technologies (India), and Dixon Electro Appliances Pvt. Ltd have claimed benefits, many other companies have stumbled.

"Beneficiaries can manufacture goods, but if domestic telecom operators prefer global legacy vendors, sales targets will remain unmet," said Rakesh Bhatnagar, director general of VoICE (Voice of Indian Commtech Enterprises), which represents local telecom gear makers. "Many of the companies that struggled to meet targets were MSMEs. They faced global component shortages (like semiconductors) and lacked the immense working capital required to buffer these supply chain shocks."

According to Bhatnagar, the successor scheme must specifically carve out a separate, lower-investment threshold tier for telecom components such as oscillators, radio frequency power amplifiers, and optical sub-assemblies. "The government should introduce a graded milestone system for MSMEs. If an MSME achieves 80% of its target, it should receive a pro-rated incentive rather than facing a 0-or-100 binary cliff that completely cuts off funding," he said.

Scheme progress

South Korea's Samsung Electronics Co., which had scored major gains under the smartphone PLI scheme, withdrew from the telecom equipment scheme. Among other participants, Netweb Technologies India Ltd also gave the scheme a miss, Mint reported on 4 March.

Through late November, 23 participating companies claimed ₹1,984 crore in incentives, with ₹1,850 crore -- or just 15% of the total outlay -- disbursed.

"Sixteen companies missed their investment targets. This is primarily due to the nature of the telecom equipment market, which is predominantly business-to-business (B2B) with only a few service providers as major buyers," Pemmasani Chandra Sekhar, minister of state for communications, said in a written reply to parliament. "Procurement decisions by service providers are based on commercial and technical considerations. Some PLI beneficiary companies were unable to secure adequate supply orders and , therefore, did not undertake the planned investments for creation of manufacturing capacity," the minister added.

Through 31 August, scheme beneficiaries had committed ₹5,950 crore in total investments, generating ₹1.28 trillion in sales, ₹31,645 crore in exports, and 36,575 jobs.

"Companies that entered the scheme with the right investment, production and sales planning have been able to achieve the targets and realise significant value from the scheme. Therefore, lower overall disbursement should not automatically lead to a reduced outlay," Prajapati said.

The existing framework offers financial payouts of 4-7% on net incremental sales over a baseline year, with small and medium enterprise (SME) applicants receiving a 1% bonus incentive in the first three years.