PLI deadline: Device makers likely to knock on PMO door for extension

With the deadline for production linked incentives closing on 31 March, most of the mobile device players who have failed to meet the qualifying criteria, are contemplating asking the Prime Minister’s Office to intervene and provide relief.

 

The move is being considered after their communication to all the key members of the empowered committee on the Production Linked Incentive (PLI) scheme failed to elicit any response.

 

Most of the nine companies (with the sole exception of Samsung) which includes three vendors of Apple Inc.  and local manufacturers such as Lava and Dixon Technologies, have mostly met the required investment targets to be eligible for the 6 per cent incentive.

 

However, eight of them have not met the sales target for the first year (2020-21) and under the rules, global companies have to do sales of Rs 4,000 crore each in the first year while domestic players are required to do sales of Rs 500 crore for each player.

 

The move comes close on the heels of the Ministry of Electronics and Information Technology (MEITY) extending by a month the last date for application from interested players under the PLI scheme for IT hardware. The last date for applications was on 31 March. 

 

The scheme was the first among the 10 new PLI schemes across various sectors which was announced last September. It was the first one to be operationalised with applications invited for eligibility.   

 

The products which have been identified for incentives including laptops, tablets, servers and PCs. The MeitY has said that the extension has been given because the guidelines for implementation and operationalizing of the scheme are still under approval.

 

The mobile device players eligible for PLI are planning to approach the Prime Minister through their industry association, the India Cellular & Electronics Association (ICEA). “We are contemplating the move. We have already written to the members of the empowered committee on PLI. We are trying our best,” said a senior ICEA member.

 

The ICEA had earlier asked the empowered committee to invoke the clause of ‘force majeure’ to declare FY2020-21, the first year under the policy, as a zero year. It had cited the disruptions due to Covid-19 and the adverse fallout of India-China tensions as reasons to make the change.

 

It has not received any official response. 

 

Mobile players involved in the PLI, however, point out that they have also discussed alternative proposals, such as increasing the sales value from the third year of the PLI to the fifth year to adjust for low sales in the first year.

 

They point out that even in the second year, reaching the incremental target of both the years now would be difficult as there is still no clarity on the impact of Covid-19 on production. 

 

Under the scheme, a global mobile player has to do an incremental sale of Rs 8,000 crore in the second year and for domestic players Rs 1,000 crore in the second year.

 

An executive with a mobile device player which was eligible for PLI said: “The deadline is over so while we have met the investment target, we have not achieved the sales target. Clearly we won’t get the incentive for the year.”

 

Other players say it is not the loss of the incentive so much as the impact the loss can have on other PLIs that concerns them. “It is the impact that this decision will have on global players on the future of all other PLI schemes which are still to be rolled out that is worrying”, said the executive of a mobile device company which is part of the PLI scheme.

 

Another concern is the restrictions on Chinese FDI in India that have a significant implication for PLI companies which are dependent on Chinese component manufacturers shifting to India and increasing value addition.

 

Mobile players involved in the PLI, however, point out that they have also discussed alternative proposals, one of which was to request the empowered committee to refer its collective recommendation to the cabinet for an appropriate decision.

 

It has also suggested tweaking the PLI scheme by increasing the sales value from the third year of the PLI to the fifth year to adjust for low sales in the first year.

 

In addition, they point out that the ban on flights to India, the restricted travel of Chinese technicians (as much of the equipment was being shifted from China), and an acute shortage of chips around the world, have also had a negative effect.