Phone makers: The government has no plans to renew the milestones of the PLI scheme

As previously reported, the proposal for the rollover of production targets was presented to MeitY by the industry body, the India Cellular Electronics Association (ICEA). Samsung, however, is not part of this body.

The initial view of the Ministry of Electronics and Information Technology (MeitY) is against the renewal of the first year production targets for companies that have been selected under the production-related incentive scheme (PLI) for home mobile production.

Officials said the ministry’s view is that the renewal of the goals may not be possible because the same has been approved by the Cabinet, and any changes may also require the approval of the Cabinet. Furthermore, as some of the companies – for example the main South Korean Samsung – selected under the program would be able to meet their production targets by March 2021, granting approval to others who may not meet the targets would be second-hand. by chance treatment, and this would be contrary to political principles.

Since there is an authorized committee that is monitoring the PLI scheme, it may at some point consider requesting renewal and make a recommendation to the government, but no such decision has been made so far.

The qualified committee (EC) is an inter-ministerial body that has the power to review the incentive rates, target segments, ceilings and eligibility criteria of the PLI scheme for telephones. It comprises the CEO of NITI Aayog together with the secretaries of the departments of economic affairs, expenditure, revenue, MeitY, the department for the promotion of industry and internal trade (DPIIT) and the general directorate of foreign trade (DGFT).

As previously reported, the proposal for the rollover of production targets was presented to MeitY by the industry body, the India Cellular Electronics Association (ICEA). Samsung, however, is not part of this body.

The reason given by ICEA for the rollover is the blocking of component supplies and travel restrictions due to the suspension of international flights, etc., which have delayed the production of the new units. The rollover proposal is for those units that have achieved their investment goals, but for such reasons beyond their control are unable to meet their production targets for March 2021.

Although not mentioned in the letter, industry sources have said that one of the main reasons for the delay in production is the delay in issuing visas to Chinese engineers and technicians who are required to install the new units here. As most of the units are moving from China, the units can only be set up by Chinese engineers. The Indian Embassy in Beijing is now quickly following up on such visa applications.

“PLI applicants are working furiously and with everything possible at their command to achieve the objectives. Many of them will be able to complete it but not before the start of FY21-22; and a handful will also be able to complete by March 2021. However, they are skating on thin ice because there could be a lot of slips under these extraordinary circumstances. Most companies have shown sincerity by making sure they already have or will attempt to complete their investment goals by March 2021. Clearly, if investments are completed, there is no reason for companies to hold back production. This in itself is reason enough to appreciate that all PLI participants approached the program in good faith and the lack of production targets for FY21 is purely the result of supply constraints, “wrote Pankaj Mohindroo, president. of ICEA, to Ajay Prakash Sawhney, MeitY secretary, last month.

ICEA’s proposal is that candidates who complete the investment objective before March 31, 2021, would have established their seriousness and commitment and therefore must be rewarded. It stated that such applicants who have met their investment targets and achieved basic production should receive the PLI on incremental production regardless of whether they have met the incremental revenue target for FY20-21. This will mean a lower outflow from the budget allocated to PLI during the current year and adjusting the target. “We believe this is within the powers of the authorized committee,” Mohindroo wrote.

The PLI scheme has set different targets for overseas manufacturers like Apple and Samsung and Indian players like Lava and Micromax. The incentives vary from 4% to 6% per year. In the first year – FY21 – foreign players are required to make an investment of Rs 250 crore and produce goods worth Rs 4,000 crore more than the previous year. Phones made by foreign players are expected to have an invoice value above Rs 15,000. In the case of Indian gamers, the investment goal is Rs 50 crore and they have to produce phones worth Rs 500 crore in the first year.

The formula suggested by ICEA is therefore: for FY21 against Rs 4,000 crore, the applicant, for example, only reached Rs 2,000 crore and there is a deficit of Rs 2,000 crore, according to this recommendation, the company should be paid 6% on Rs 2,000 crore and the balance Rs 2,000 crore, the applicant can choose to add the incremental turnover criteria in one of FY22 or FY23. This will ensure that production targets over the five-year period are not reduced. Therefore, the spirit of PLI remains intact.

Foxconn units such as Hon Hai and Rising Star, which are contract manufacturers for Apple, Wistron and Pegatron, also contract manufacturers from Apple and Samsung are among the overseas players selected under the PLI program. Among the national players the selected ones are Lava, Bhagwati (Micromax), Padget Electronics, UTL Neolyncs and Optiemus Electronics.

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