The government could unveil a Rs 36000 Crore fund to provide production linked incentives to smartphone makers to wean high-end electronic manufacturing away from China and Vietnam to India in the upcoming budget, three top government officials said. “MeitY (Ministry of Electronics and Information Technology) is working on a productionlinked incentive and there will be certain rigid criteria to avail this incentive. We only want those companies which are going to make India an electronics manufacturing and export hub to be able to use this incentive,” one of the officials told ET.
The official added that while this was primarily to attract global supply chain companies such as Apple and Samsung to make India their manufacturing and export base, some other incentives – credit guarantee schemes and interest subvention schemes – were designed to help local phone makers such as Lava become dominant global players in the entry segment, were also being thrashed out.
A fortnight ago, the PM had met with smartphone manufacturers including representatives from Apple, Samsung and Lava and sought suggestions on how to make India an electronics manufacturing and export hub. Following this, government officials have fast-tracked working on the modalities of the incentives that need to be doled out to attract big ticket investments in the country.
The government has set an ambitious target to increase smartphone exports from the country to $110 billion by 2025 from $3 billion now.
The PLI scheme is expected to formally replace the duty credit scrip under the Merchandise Exports from India Scheme (Meis), which India suspended from December 31. Duty credit scrip is a certificate with certain monetary value that can be utilised for payment of customs duty.
“The new scheme is most likely also going to be a form of duty credit scrip,” said another senior officer, adding that the fund would be spread out over a period of five years and the budgetary support from the scheme in the first year could be close to Rs. 3,000 crore.
The news would bring cheer to the smartphone manufacturing industry that hit the panic button after a government notification halved MEIS support from 4% to 2% from January 1. The likes of Foxconn — the world’s largest contract manufacturer of smartphones that is also among the biggest in India where it makes phones for Apple — as well as Samsung, Huawei, Vivo and Oppo that together account for over 80% of $500-billion global mobile phone market, have demanded clarity on the export sops.
A high-level committee set up by the Prime Minister’s Office in July, chaired by Niti Aayog CEO Amitabh Kant, is believed to have submitted that the government could support as much as 7% through a suitable MEIS replacement. Officials said the final support could range between 5% and 7%.
Under the PLI scheme, the criterion being deliberated on include employment generated, investment made, average selling price of phones and production. The industry is however batting for lesser number of qualifiers to make the scheme less complicated and more effective.
According to various industry studies, the policy support in Vietnam renders India uncompetitive by 10-12% points and the disability of India compared to China lies between 19-23%.
Indian Cellular & Electronics Association, which has Apple, Foxconn, Xiaomi and Flextronics among its members, has flagged subsidy for machinery & equipment, cost of power, incentive for supporting industry, labour subsidy, logistics and reduction of land rentals as other disabilities India faces in comparison to rivals such as Vietnam. These issues, the industry holds, can be negotiated with respective state governments Government officials are trying to ensure that the new policy is WTO compliant and doesn’t directly link the support to exports while ensuring that the funds are not used for manufacturing devices to be sold locally.―Business Telegraph