How Does The PLI Scheme Work?

How Does The PLI Scheme Work?

Known to avail a major boost to GOI’s goal of Aatma Nirbhar Bharat, let us understand what the PLI scheme is all about.

Crux of the Matter

What Is It?
Production Linked Incentive Scheme (PLI) was introduced by GOI in March 2020 and it aims at:

  • Making India a Manufacturing Hub.
  • Increasing Foreign Investments
  • Managing Trade Balance.
  • Lifting Standard of Living through expanding employment opportunities.

How Does It Work?
Incentives are based on investment & targeted increments in production.

For example, a firm manufactured 2,000 units in FY 19 -20. Now in 2020 -21, if production increases to 3,000 units., then the incentives applicable will be between 4% – 6% on the incremental 1,000 units produced.

Eligibility

  • Should be an Indian manufacturing company.
  • Companies having a registered production unit in India are eligible.
  • Firms can either set up a new unit or demand PLI for existing ones.
  • Applicable for 5 years – FY 19-20 to be considered a base year.

Sector Wise Allocation

  • Mobiles & Electronic components – ₹40,951 crore
  • Critical drugs & API’s – ₹6,940 crore
  • Medical devices – ₹7,420 crore
  • ACC battery – ₹18,100 crore
  • Electronic/technology products – ₹5,000 crore
  • Automobile & components – ₹57,042 crore
  • Pharmaceutical drugs – ₹15,000 crore
  • Telecom and networking products – ₹12,195 crore
  • Textile products – ₹10,683 crore
  • Food products – ₹10,900 crore
  • Solar PV – ₹4,500 crore
  • White goods (ACs and LEDs) – ₹6,238 crore
  • Specialty steel – ₹6,322 crore

The Hitches

December 2020
Apple Manufacturers, Samsung, Lava, Micromax asked the GOI to roll over the production targets under PLI because of their inability to meet the same.

October 2020
Even after 2 months of announcing the PLI scheme, the applicants were yet to receive the formal letters, striking uncertainty.

Curiopedia
  • The inverse of a bonus payment, that is when base salaries shrink on poor performance, is called a malus.
  • The term clawback or claw back refers to any money or benefits that have been given out but are required to be returned (clawed back) due to special circumstances or events, such as the monies having been received as the result of a financial crime, or where there is a clawback provision in the executive compensation contract.
  • Performance-related pay is a salary or wages paid system based on positioning the individual, or team, on their pay band according to how well they perform. A fundamental criticism of performance-related pay is that the performance of a complex job as a whole is reduced to a simple, often single measure of performance.

Does India’s Telecom Market Have A New Leader To Offer?

Recent reports by Telecom Regulatory Authority of India (TRAI) show that in the month of July, both, Airtel and Jio gained users lost by Vi (formerly Vodafone-Idea). Currently, Jio has highest number of total users in India but in terms of active users Airtel and Jio have almost similar numbers. Also, Jio’s Average Revenue Per User (ARPU) was lower than Airtel’s and Vi’s in the July-Sept quarter of 2020. Let’s have a close look at this battle for the top position in the telecom market with the help of some numbers.

Crux of the Matter

Before we delve into the numbers of individual companies, let us have a look at how the subscriber base looks like.

Including both the active and inactive users, Jio tops the list of highest market share with ~40.1 crore subscribers. Have a look at the complete breakdown below:

The story gets interesting here onwards. Airtel and Vi, both lost users in the month of June, whereas Jio gained many of them. However, in the month of July, only Vi lost consumers, whereas, as also can be seen in the chart below, Airtel and Jio both seem to gain Vi’s lost users.

Well, yes Airtel is gaining momentum and and catching up with the telecom leader Jio. but here is something to spice up that narrative. Although Jio has the highest number of total users (inactive + active), there is not much difference between the active users of Jio and Airtel.

What is ARPU?
Average revenue per user (ARPU) is one of the metrics used to measure how a telecom company is performing. Simply, it is the average revenue the telecom generates from its user. It is calculated by dividing the total revenue by number of subscribers. The race to the top between Jio and Airtel intensifies in another facet as Airtel reported a higher ARPU than Jio in the July-September quarter of 2020. Have a look at the infographic below.

Read More: Understanding AGR Dispute And India’s Changing Telecoms Industry

Curiopedia
  • The concept of SMS was developed in the Franco-German GSM Cooperation in 1984 by Friedhelm Hillebrand and Bernard Ghillebaert. Then it was necessary to limit the length of the messages to 128 bytes (later improved to 160 seven-bit characters).
  • Telephone phobia is a fear of using telephones. People who suffer from this usual text or email their contacts
  • The very first phone call was “Watson come here, I want you!” It was made on March 10 1876 in Boston, Massachusetts, between Alexander Graham Bell and his assistant Thomas A. Watson
  • The world’s most popular phone is the Nokia 1100, a basic GSM Candybar launched in 2003. Over 250 million 1100s have been sold.
  • In 2019, the Ministry of Communications decided to merge MTNL with Bharat Sanchar Nigam Limited (BSNL). Revival package includes monetizing assets, raising funds, TD-LTE spectrum, voluntary retirement scheme for employees

What Is The Spectrum Issue In India?

What Is The Spectrum Issue In India?

AGR dues case is becoming complex as the Supreme Court seems to be halted over the matter of ownership of spectrum. Due to the lack of clarity on the definition of its ownership, it is hard to determine how will the insolvent telecoms like RCom pay the dues. But what is a spectrum and how does it work in India? Let’s unravel.

Crux of the Matter

What Is A Spectrum?
It is a range of electromagnetic waves used for communication. A frequency range in the spectrum of EM waves is called a band. The government allocates fixed bands for usage to avoid clashes and standardize antenna requirements to access bands. 800MHz, 900MHz, 1800MHz, 2100MHz, and 2300MHz are some of the most used bands for cellular communication and GSM, WCDMA, and LTE are standards defined on the usage of bands.

How Telecoms Use It?
At present, there are 22 telecom circles in India. Telecom companies bid to acquire a license of the spectrum that is held by the Central Government under a trust. If the company wins the bid, the government would allow it to operate on specified frequencies for a fixed number of years. Till 2011, the telecom operator’s license and spectrum were linked with each other.

But after 2011 telecoms were required to bid separately for license and to pay for spectrum usage fees to the government. Reliance Jio and Vodafone 4G Spectrum’s use 1800MHz band whereas Airtel’s uses 2300 MHz. To operate in any circle company needs spectrum, and if it does not have any, it will use other companies’ to offer service at another band to their customers.

The 2G scam is an infamous telecom scam in India that cost the govt ₹1.76 lakh crore as per CAG.

Who Does Spectrum Belong To?
AGR dues case has halted in recent times over the matter of ownership of the spectrum. There is a lack of clarity on the definition of its ownership. Solicitor General Tushar Mehta said that the government in an appeal to NCLT said that the spectrum is a national property and thus cannot be part of assets of a company under Insolvency and Bankruptcy Code. The bench hearing the case brought up the opposite case of Aircel that sold spectrum and license both and asked who gave the permission to Aircel to sell it. State Bank of India says that it is an “integral asset” of a telecom. SC in its latest hearing on 17th August has asked whether it can be bought and sold under IBC, which will be discussed in the next hearing.

Should Jio Be Liable For RCom?
SC has asked the government its views on Jio paying off AGR dues of RCom. Jio is currently using 38% of RCom’s total spectrum and both the companies entered a sharing agreement in 2016. However, Jio has informed the court that it is not liable to pay AGR dues for using RCom’s Spectrum. Jio has written that ‘Spectrum Sharing guidelines do not make any provision for sharing of liabilities’ in the affidavit submitted to the court.

Also Read: Understanding AGR Dispute And India’s Changing Telecoms Industry

Curiopedia
  • Airband is the name for a group of frequencies in the VHF radio spectrum allocated to radio communication in civil aviation. In most countries, a license to operate airband equipment is required and the operator is tested on competency in procedures, language, and the use of the phonetic alphabet.
  • Subramanian Swamy is an Indian politician, economist and statistician who serves as a nominated Member of Parliament in Rajya Sabha. Swamy wrote a book on the 2g scam titled, “2G Spectrum Scam”.
  • The 2G case was an alleged scam that the politicians and private officials under the United Progressive Alliance coalition government in India were accused of committing. The Union Government of that time was accused of undercharging mobile telephone companies for frequency allocation licenses, which they used to create 2G-spectrum-subscriptions for cell phones.
  • Radiolinja was a Finnish GSM operator founded on September 19, 1988. G cellular networks were commercially launched on the GSM standard in Finland by Radiolinja in 1991.

Understanding AGR Dispute And India’s Changing Telecoms Industry

Understanding AGR Dispute And India's Changing Telecoms

The Supreme Court has reserved its order on the timeline of payment of Adjusted Gross Revenue (AGR) due of telecoms. Companies are struggling to hold their presence in the market. Telecoms giants have asked SC to give 15 years of time to repay this due. Let’s understand how a change in the definition of AGR resulted in a huge amount of debt for telecoms in India and whether this would change the landscape of the industry.

Crux of the Matter

SC’s Stand Over The Matter
After hearing telecoms on the matter of due and payment timeline, the Supreme Court has reserved its order on the timeline of payment of Adjusted Gross Revenue (AGR) due of telecom companies. Since the amount of due is huge, the government has proposed to give a timeline of 20 years to pay all the dues. But companies have shown their readiness to pay dues even in 15 years. Moreover, SC has denied reassessment of AGR dues. Government calculated amounts will be taken as the final amount for AGR dues.

Adjusted Gross Revenue
Adjusted Gross Revenue (AGR) is the usage and licensing fee that telecoms are charged by the Department of Telecommunications (DoT). AGR is divided into spectrum usage charges and licensing fees, pegged between 3-5% and 8% respectively. The dispute is about what particulars to include in the calculation of AGR. DoT says that AGR should be levied on total revenue. But in 2005, the Cellular Operators Association of India (COAI) challenged DoT’s definition, saying AGR should be calculated on revenue from core operations and exclude non-core revenue such as rent, dividend, interest, etc. In 2015, Telecom Disputes Settlement and Appellate Tribunal (TDSAT) ruled in favor of COAI and telecoms. But In 2019, SC upheld DoT’s definition of AGR, and hence companies are paying accumulated dues of past years.


Premium Plans Controversy
Recently, TRAI had ordered telecom giants to block their premium plans with immediate effect. Vodafone Idea and Bharti Airtel offered premium plans RedX and Platinum respectively. The consumer having premium plans can get better and faster services with high-speed internet. Considering this, Reliance Jio lodged a complaint claiming that providing better services to one set of customers would ‘undoubtedly deteriorate service quality to another set of customers’. In July 2020, TRAI ordered telecom giants to block these plans with immediate effect. TRAI’s argument was regarding the disruption of service and misleading advertisement of faster speed.

Companies replied that they are using ‘advanced technologies’ to help the premium customers get better service and faster speeds without impacting other users. In addition, telecom operators say that they need flexibility on tariff plans if the government is not ready to decide floor price. Soon after TRAI’s orders, Vodafone-Idea moved to TDSAT challenging the order. TDSAT stayed TRAI’s orders and allowed Vodafone-Idea to onboard new customers, but asked TRAI to continue its investigation of the premium plans offered by Airtel and Voda-Idea.

Curiopedia
  • The name Vodafone comes from voice data fone (phone), chosen by the company to “reflect the provision of voice and data services over mobile phones”. Racal Electronics, the UK’s largest maker of military radio technology, formed a joint venture with Millicom called ‘Racal’, which evolved into the present Vodafone.
  • As of 31 Dec 2019, India has the world’s second-largest Internet user-base with 661.94 million broadband internet subscribers in the country. It has one of the lowest call-tariffs in the world enabled due to hyper-competition among mega telecom operators.
  • Telecom Regulatory Authority of India was established on 20 February 1997 by an Act of Parliament to regulate telecom services and tariffs in India. Earlier regulation of telecom services and tariffs was overseen by the Central Government. The current Chairman of TRAI is Ram Sewak Sharma.

India Asks Streaming Services to Reduce Bandwidth Demands as WFH Increases

To prevent coronavirus spread, 75 districts have been locked down so far and Section 144 has been imposed at various places in India, compelling citizens to stay inside. The telecom industry is under massive strain due to the increase in the use of the Internet by people staying indoors who stream high-quality videos on various streaming platforms.
Complete Coverage: Coronavirus

Crux of the Matter

Coronavirus-hit sectors are at the risk of incurring huge financial losses and infrastructural damages. Some sectors like aviation and tourism sectors are facing huge demand slump, whereas the telecom sector is facing huge consumption of the Internet and the high bandwidth is posing a threat of Internet supply breakage and infrastructural damages.

India is facing a situation similar to the European Union. Due to the sudden increase in the use of high bandwidth internet by people through OTT (over-the-top) platforms like Netflix, Amazon Prime, Hotstar, ATL Balaji, Voot, and MX Player, etc, the government of India has urged streaming service providers to reduce their streaming quality from HD to SD.

We believe that during this critical time, it is absolutely essential for the streaming platforms to cooperate with TSPs to manage traffic distribution patterns which are likely to strain network infrastructure at a time when it is needed for various critical requirements.

– COAI in a letter to OTT platforms

Cellular Operator’s Association of India (COAI) has requested the government to take measures and help them to serve efficiently without any internet blackout. The companies are falling short of data because of the high consumption of data in streaming, which will results in data shortage when required for work from home. Thus to keep the functioning of the economy smooth and keep the strain on telecom infrastructure less, it is inevitable to reduce high bandwidth consumption.

Curiopedia

Streaming Service Provider – A streaming service provider is a subscription-based service offering online streaming of films and television programs. Most of these services are owned by major film studios. The streaming services started as an add-on to DVD offerings, which are supplements to the programs watched. Streaming is an alternative to file downloading, a process in which the end-user obtains the entire file for the content before watching or listening to it. Check out the list of Streaming Service Provider.