Govt extends PLI scheme for handsets by a year; huge relief for industry

The government announced to extend the production-linked incentive (PLI) scheme for mobile phones by one year until FY26, offering a major assistance to mobile phone manufacturers including both domestic players such as Micromax, Dixon, Lava, etc. and iPhone manufacturers such as Foxconn, Wistron, etc.

On Monday, Finance Minister, Ms. Nirmala Sitharaman announced the fiscal stimulus package and stated that for the production-linked incentive (PLI) scheme for mobile phone, manufacturers would be able to consider FY22 as the first year of manufacturing instead of FY21.

Due to pandemic induced lockdown and restrictions impacting supply change, installation delays, etc., manufacturers have not been able to meet incremental manufacturing situations.

A timeline amendment would help manufacturers to post incremental production worth Rs. 4,000 crore (US$ 539.17 million) in this fiscal year, instead of Rs. 8,000 crore (US$ 1.08 billion) in the second year, assisting the manufacturers avail maximum incentives worth 6% in the year.

The PLI scheme worth Rs. 41,000 crore (US$ 5.53 billion) - which includes incentives in the form of cash pay-outs based on targeted increments in manufacturing and investment - is aimed at establishing India as an attractive market for investments. The Centre is planning to establish the country as a global manufacturing hub with mobile phones export target worth US$ 100 billion over the next five years.

As published by ET, Samsung is one of 16 enterprises to have reached its FY21 target for smartphones. The firm had to only expand production at its current units.

Samsung would be able to obtain the incentives for FY21 as the government has granted flexibility in deciding any five years out of the six years. As per a statement issued by the government, this indicates that the investments made in FY21 would still be considered as eligible investments.

Under the PLI scheme for handset, to receive a 6% direct incentive as cashback, foreign firms are required to invest Rs. 250 crore (US$ 33.70 million) each and generate incremental output of Rs. 4,000 crore (US$ 539.17 million) in the first year.

To receive the same incentive, handset manufacturers in India are required to invest Rs. 50 crore (US$ 6.74 million) each for Rs. 500 crore (US$ 67.40 million) of incremental output. In the second, third, fourth and fifth years, companies would have to generate phones manufacturing worth Rs. 8,000 crore (US$ 1.08 billion), Rs. 15,000 crore (US$ 2.02 billion), Rs. 20,000 crore (US$ 2.70 billion) and Rs. 25,000 crore (US$ 3.37 billion) over the base year production value, which would significantly boost annual exports of phone handsets from the current US$ 3 billion.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.