We got the PIO card back after more than six weeks. Maybe complaining to the consulate helped, although we never heard anything directly.

The end result is that while GoI keeps 'encouraging' people to convert, and keeps floating deadlines by which people might be required to convert, the government and its contractors have a built-in preference for increasing amounts of paperwork, countersigned, rubber-stamped and in triplicate. Thus PIO-to-OCI conversion, which should be automatic, takes more paperwork than the original PIO did.