Final call on PLI Scheme for mobile makers on September 9

The much-delayed incentives under the production-linked incentive (PLI) scheme for mobile manufacturers are set to be released, promising huge relief for the likes of Samsung and Dixon Technologies.

The empowered group is scheduled to meet on September 9 to take a final call on the submissions of the selected companies, officials familiar with the matter said.

As per officials in the Ministry of Electronics and IT (MeitY), so far Indian contract manufacturer Dixon and Korean major Samsung have submitted the paperwork around production targets, while others including Apple contract manufacturers Hon Hai (Foxconn) and Wistron are in the process of doing so.

“Those who have submitted the claims will be given the incentives after approval from the empowered group,” said an official who did not want to be identified.

A major reason for the delay in disbursing incentives, according to an industry executive, is the determination of the factory price of the mobile phones manufactured under the scheme, especially for smartphone brands doing their own manufacturing, such as Samsung. This has now been ironed out, they said.

The calculation of total value of smartphones manufactured is determined using the price. For contract manufacturers like Dixon, it is only the costs incurred on manufacturing. However, in case of a brand doing its own manufacturing, branding and marketing, operational, and other costs are also involved.

The official didn’t share information around the incentive amount given to various companies as it depends on the claims filed by an individual firm. But as per the incentive outlay, the government will be giving out cashbacks of ?900 crore in 2021-22 and ?4,578 crore in 2022-23.

To become eligible for claiming benefits in the first year of the PLI scheme, a global manufacturer must invest ?250 crore and achieve minimum incremental sales of ?4,000 crore. Global firms can claim incentives for incremental sales up to ?15,000 crore. For local companies, the investment target was set at ?50 crore and they were required to manufacture phones worth ?500 crore in the first year.

Also, while global firms can claim incentives only for devices priced at ?15,000 or more, there is no such requirement for local companies.

Samsung was the only company to meet production targets in FY21, the first year of the scheme. As most of the firms had failed to meet the targets due to supply chain constraints in FY21, the government decided to extend the scheme tenure to six years from the originally planned five. The firms were given the option to choose any of the five years during the six-year tenure to meet the targets and claim financial incentives.

So, while Samsung will be claiming the benefits for the first and second years, all the other firms will be filing claims for the first year.

The overall financial outlay for the PLI scheme was reduced to ?38,601 crore over five years from the original ?40,951 crore. One of the reasons for the reduced outlay was that Pegatron, also an Apple contract manufacturer, will be claiming incentives for only four years of the scheme tenure. The company has started manufacturing from April 1 this year, so it will be eligible for claiming benefits next year.