With the ministry of electronics and info technologies (MeitY) so far not agreeing to roll more than incremental sales targets for smartphone production-linked incentive scheme applicants, South Korean big Samsung Electronics has emerged as the only firm to qualify for availing incentives for the initial year (FY21).
A total of 10 firms — 5 international and 5 nearby — have been chosen for the PLI scheme which began in August 2020, and have been expected to meet the set target for incremental sales of goods in FY21 more than the base year, that is, FY20.
Sources mentioned Samsung has been capable to clock incremental sales in FY21 more than the base year of about Rs 15,000 crore, which is also the ceiling for availing the incentive. The total outlay for smartphone PLI more than 5 years is Rs 40,951 crore and the incentive ranges about 4-6% annually. For FY21, the total incentive was of Rs 5,334 crore. The threshold for qualifying for the incentive was incremental sales of Rs 4,000 crore and maximum Rs 15,000 crore. This signifies Samsung will get Rs 900 crore (6% of Rs 15,000 crore) as incentive from the government for the initial fiscal.
Since the other 3 applicants – Foxconn, Rising Star and Wistron, all contract producers of Apple – in the international category have been not capable to meet their incremental sales target, they would not get any incentive for the fiscal. Had Samsung crossed the Rs 15,000-crore mark, it would have got even some extra quantity as incentive from the unappropriated quantity resulting in the beneath-efficiency by the other 3.
As reported earlier, sector body India Cellular Electronics Association (ICEA) has submitted a proposal to MeitY for rolling more than the sales targets for the initial year. Samsung, even so, is not a member of this body.
The cause cited by ICEA for the rollover is stuck supplies of elements, travel restrictions due to suspension of international flights, and so forth last year due to lockdown, which delayed production by the new units. The proposal for rollover is for units which have met their investment targets but due to motives beyond their manage have been not capable to meet their sales targets for March 2021.
The benefit Samsung had more than the contract producers of Apple was that it had a operating factory in India whereas the latter required to shift units from China.
The PLI scheme has set various targets for overseas producers like Apple and Samsung and Indian players like Lava and Micromax. In the initial year – FY21 — overseas players have been expected to make an investment of Rs 250 crore and manufacture goods worth Rs 4,000 crore more than the prior year. The phones created by overseas players really should have an invoice worth of more than Rs 15,000. In the case of Indian players, the investment target is Rs 50 crore and they have been expected to manufacture phones worth Rs 500 crore in the initial year.
The formula recommended by ICEA is hence: For FY21 against Rs 4,000 crore, the applicant, say has accomplished only Rs 2,000 crore and there is a shortfall of Rs 2,000 crore, as per the recommendation, the organization really should be paid 6% on Rs 2,000 crore and the balance Rs 2,000 crore, the applicant can opt to add in the incremental turnover criteria in either of the FY22 or FY23. This will make sure that the production targets more than the 5 year period are not lowered. Therefore, the spirit of PLI would stay intact.
The ICEA has now taken the matter of rollover to the finance ministry, Niti Aayog and division for promotion of sector and internal trade (DPIIT). But so far, no selection to grant the rollover has been taken. There’s an empowered committee (EC), which is an inter-ministerial body which has the energy to revise incentive prices, target segments, ceilings, and eligibility criteria of the PLI scheme for handsets. It consists of the Niti Aayog CEO along with the secretaries of departments of financial affairs, expenditure, income, MeitY, DPIIT and the directorate basic of foreign trade (DGFT).