FY22 likely to be first year of production for PLI scheme for mobile phone manufacturing

Due to disruptions brought about by the COVID-19 pandemic, the government is likely to make FY22 the first year of production for the PLI scheme for mobile phone manufacturing. This will bring much needed relief to iPhone contract manufacturers like Foxconn and Wistron including Dixon, Lava and Micromax.

The ambitious Rs 41,000 crore PLI scheme, which entails incentives in the form of cash payouts based on investment and targeted increments in production, is aimed at making India a more attractive manufacturing destination. The Centre is looking to make India a global manufacturing hub with an export target for phones worth $100 billion over the next five years.

The PLI scheme also seeks that the companies achieve incremental sales of products manufactured either from a new plant or the expanded unit of the same plant. Like all schemes, even in the case of PLI for mobile handset manufacturing, both these parameters are applicable for companies to be eligible to get the incentives.

In March, the Indian Cellular and Electronics Association (ICEA) wrote to the NITI Aayog and the Secretary of the Ministry of Electronics and Information Technology to consider declaring 2020-21 as zero-year for PLI scheme for manufacturing of mobile phones. They said that for the purposes of calculation of the incentives to be given to under the PLI scheme, the government should consider the incremental investments they will make and sales of products that they achieve from next financial year.

However, the nodal Ministry of Electronics & Information Technology (MeitY) had opposed the industry demand and gave Samsung as an example. But owing to the severe second wave of COVID-19 infections, which restricted manufacturing across the country, the government is inclined to accept the demand. The industry in a letter ony May 19 cited the second wave and the inability to vaccinate workers as key reasons why factories haven’t been running optimally.

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“Karnataka, Tamil Nadu, Andhra Pradesh and Telangana are already under lockdown and Uttar Pradesh also has severe restrictions,” it said. “Under the circumstances, even with optimistic estimates, no more than eight months will be available in FY2021-22, and even that could reduce for meeting the PLI targets of year two.” Moreover, the association also pointed out that PLI schemes in other sectors such as pharmaceuticals and food products announced in the last couple of months had factored in the flexibility needed in terms of timeline.