PLI schedule for mobile phone manufacturing could start in FY22, Telecom News, ET Telecom
“With the second wave of Covid hitting the country, there is serious reflection on the matter as companies are really struggling to meet their targets,” one of the officials told ET.
A change in the schedule will mean manufacturers will have to post additional 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 benefit from maximum incentives of a value of 6% during the year, according to the experts.
The ambitious Rs41,000 crore PLI program – which involves incentives in the form of cash payments based on investments and targeted increases in production – aims to make India a more attractive manufacturing destination and move companies away from bases such as China and Vietnam. The Center seeks to make the country a global manufacturing hub with a goal of exporting phones worth $ 100 billion over the next five years.
“If this (change of schedule) materializes, it will have a multiple impact. It will send the right signals to all international investors that the government is there to support them in this time of pandemic, ”said Navkender Singh, research director at IDC. “In addition, you have to have a long-term vision on this subject. While the government does not lose much by pushing the one-year program, the industry gains significantly and (it) shows India as an investor-friendly destination.
He added that it was important for the government to show its support for the plan, which is the government’s main PLI program, which has extended it to other sectors.
As reported by ET, Samsung is the only one of 16 companies to have achieved its FY21 target for smartphones. Unlike others, it didn’t have to ship plants and machinery to India and just needed to increase production at its existing facilities, industry executives said.
The nodal electronics and information technology ministry (MeitY) had opposed the industry demand, citing Samsung’s example of reaching its target. But due to the severe second wave of Covid, which has restricted manufacturing across the country, the government is now more inclined to accept the request. This will likely be brought to Cabinet shortly, a second official said.
The industry’s latest push came in a May 19 letter, which cited the second wave and the inability to vaccinate workers as the main reasons factories were not performing optimally. The India Cellular & Electronics Association (ICEA) appealed in a letter to the panel responding to the appeal regarding the postponement under clause 8.9 of the PLI guidelines in the event of force majeure.
“Karnataka, Tamil Nadu, Andhra Pradesh and Telangana are already under lockdown, and Uttar Pradesh is also under severe restrictions,” the lobby said, highlighting the borders in the five States where most LIP units are located. “Under these circumstances, even with optimistic estimates, no more than eight months will be available in the 2021-2022 fiscal year, and even that could reduce, to meet the second year PLI goals.”
There is nothing that companies applying for the LIP can do to help them return to even normal production levels, at least for the next two or three months, the ICEA said.
The association also pointed out that PLI programs in other sectors such as pharmaceuticals and food products announced in the past two months have taken into account the necessary flexibility in terms of timelines.
Under the combined PLI scheme, foreign companies had to invest Rs 250 crore each and produce additional production of Rs 4000 crore in the first year to obtain a direct incentive of 6% in the form of cashback. To get the same incentive, Indian handset makers had to invest Rs 50 crore each for Rs 500 crore of additional production. In the second, third, fourth and fifth years, manufacturers will be required to produce phones worth Rs 8,000 crore, Rs 15,000 crore, Rs 20,000 crore and Rs 25,000 crore compared to the production value for the year of base, which would significantly improve annual exports of telephone handsets to the existing $ 3 billion.