PLI timeline for mobile phone manufacturing may begin in FY22

The government is considering making FY22 the first year of production instead of FY21 for the production-linked incentive (PLI) scheme for mobile phone manufacturing, senior government officials said. If approved, the move will bring relief to the likes of iPhone contract makers Foxconn and Wistron besides homegrown brands Dixon, Lava and Micromax. Meeting first-year PLI targets has become tough due to pandemic curbs and global supply chain disruptions, among other geopolitical factors.

“With the second wave of Covid hitting the country, there is serious thinking on the matter as companies are genuinely finding it difficult to meet their targets,”.

This will entail no additional budgetary outgo on part of the government.

A change in the timeline will mean manufacturers need to post incremental production worth Rs 4,000 crore in this fiscal year, instead of Rs 8,000 crore in the second year. They will thus be able to avail of maximum incentives worth 6% during the year, experts said.

The ambitious Rs 41,000 crore PLI scheme – which entails incentives in the form of cash payouts based on investment and targeted increments in production — is aimed at making India a more attractive manufacturing destination and weaning companies away from bases such as China and Vietnam. The Centre is looking to make the country a global manufacturing hub with an export target for phones worth $100 billion over the next five years.

“If this (change in timeline) comes through, this will have a several-fold impact. It will send the right signals to all the international investors that the government is there to support them in these pandemic times,” said IDC research director Navkendar Singh. “Also, one has to take a long-term view on this. While the government doesn’t lose much in pushing the scheme by a year, the industry gains significantly and (it) shows India as an investor friendly destination.”

He added that it’s important for the government to show its support for the plan, which is the marquee PLI scheme of the government, which has extended it to other sectors.

As reported by ET, Samsung is the only one of 16 companies to have met its FY21 target for smartphones. Unlike others, it didn’t have to ship any plant and machinery to India and simply needed to ramp up production at its existing facilities, industry executives said.

The nodal ministry of electronics & information technology (MeitY) had opposed the industry demand, citing Samsung’s example of meeting its target. But owing to the severe second Covid wave, which restricted manufacturing across the country, the government is now more inclined to accept the demand. This will likely be taken to Cabinet shortly, a second official said.

The industry’s latest push was made in a May 19 letter, which cited the second wave and the inability to vaccinate workers as key reasons why factories haven’t been running optimally. The India Cellular & Electronics Association (ICEA) made its appeal in a letter to the panel responsible for taking the call on the deferment under clause 8.9 of the PLI guidelines in case of force majeure.

“Karnataka, TN, Andhra Pradesh and Telangana are already under lockdown, and UP also has severe restrictions,” the lobby group said, highlighting curbs in the five states where most PLI units are located. VNExplorer