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India paves way for Apple and others to boost domestic production
Government abandoned disputed clauses, including appraisal of plant and machinery to be brought in from China and South Korea, which Apple chiefly opposed, paving the way for iPhone maker and others like Samsung, Foxconn, Oppo, Vivo and Flextronics play a bigger role in local production using the production incentive system (PLI).
“The committee of empowered secretaries met on Friday and decided to delete the clause, which assessed factories and machinery imported into India at 40% of its value, and agreed to a few other changes so that manufacturing could move into India in a big way. “Said an official to ET aware of the discussions at the meeting.
ET announced in its May 11 edition that Apple, through its contractors Wistron and Foxconn, may transfer a significant portion of its manufacturing plant to India as part of the proposed PLI program. However, the iPhone maker had raised concerns about certain clauses, including the government’s assessment of facilities and machinery. The government is also in talks with a third Apple subcontractor, Pegatron, to outsource part of its manufacturing to India, the official said.
“The irritants have been resolved,” added the official. Through this program, India is trying to attract American investment by encouraging American companies to diversify their manufacturing activities outside of China as part of the “China plus one strategy”.
Among the agreed changes on Friday was the inclusion of the industry in discussions before making changes to the PLI regime once these companies have invested and started producing in the country. “Earlier, a clause only allowed the committee empowered to unilaterally change the rules, but investors had expressed concerns about the clause,” said the official.
Other changes include the removal of various caps, including another clause that said the government would only release the incentive if the industry only achieved its goals if it had the money to do so. Instead, a force majeure clause, which allows companies to request relief from targets in the event of natural disasters such as Covid-19, has been added.
The government hopes to attract large-scale smartphone manufacturing to India and increase exports from India to more than $ 100 billion by 2025, up from less than $ 3 billion currently.
“In addition, the proposed investors have expressed concern over the excessive commercial information sought by the government, which has been further watered down,” said the official.
The official added that depending on the production targets achieved by companies in the following years, the government could modify the benefits depending on the performance of the companies.
To benefit from the staggered incentives of between 4% and 6% over a period of five years, foreign manufacturers will have to produce high-end phones (with an on-board freight value of more than $ 200) of more than Rs 4,000 crore beyond their production level during the reference year.
In the second, third, fourth and fifth years, manufacturers will have to produce phones worth Rs 8,000 crore, Rs 15,000 crore, Rs 20,000 crore and Rs 25,000 crore on the production value of the base year for benefit from the incentives.
The program, which is expected to be notified next week, will offer incentives to foreign and domestic manufacturers over a five-year period. While eligibility for foreign investors as well as domestic investors varies, a total of Rs 40,951 crore has been reserved as incentives for companies, which achieve production and minimum incentive targets.
—Olt News
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