Production-Linked Incentive scheme reset: Govt may shift smartphone PLI by a year

Companies that did not meet the FY21 incremental sales target now have time till FY26; FY21 will now be treated as Year Zero year meant to make preparations.

The government may tweak the production-linked incentive (PLI) scheme for smartphones to make sure most of the companies that could not meet the first year incremental sales target in FY21 do not miss out on the financial incentives.

The ministry of electronics and information technology (MeitY) is likely to extend the tenure of the incentive scheme from five to six years, leaving the outlay, investment and sales targets and incentive structure unchanged. Companies that did not meet the FY21 incremental sales target now have time till FY26; FY21 will now be treated as Year Zero year meant to make preparations.

However, any firm that has met the FY21 incremental sales target, will be given the incentives as per the current scheme with FY25 as the termination year. As reported by FE earlier, South Korean major Samsung Electronics has emerged as the only firm, of a total of 10 selected under the scheme, to qualify for availing incentives for the first year. The company’s ready and running manufacturing base in India helped it clock incremental sales in FY21, over the base year, of around Rs 15,000 crore, which is the ceiling for bagging the incentive.

A total of 10 firms – five global and five local – were selected for the PLI scheme which started in August 2020, and were required to meet the set target for incremental sales of goods in FY21 over the base year, i.e, FY20. The total outlay for smartphone PLI over five years is Rs 40,951 crore and the incentive ranges between 4-6% annually. For FY21, the total incentive was of Rs 5,334 crore. The threshold for qualifying for incentive was incremental sales of Rs 4,000 crore and the maximum was Rs 15,000 crore. Samsung will get Rs 900 crore (6% of Rs 15,000 crore) as an incentive.

Other firms, including the three global applicants – Foxconn, Rising Star, and Wistron, all contract manufacturers of Apple – were not able to meet their incremental sales targets, due to Covid-related disruptions in travel; they were unable to relocate their manufacturing bases to India from China and Vietnam in time.

The PLI scheme has set different targets for overseas manufacturers like Apple and Samsung and Indian players like Lava and Micromax. In the first year – FY21 – overseas players were required to make an investment of Rs 250 crore and manufacture goods worth Rs 4,000 crore more than the previous year. The phones made by overseas players should have an invoice value of over Rs 15,000. In the case of Indian players, the investment target is Rs 50 crore and they were required to manufacture phones worth Rs 500 crore in the first year.