Breather for electronics manufacturers as govt extends PLI by a year

Move will help mobile handset and other electronics makers impacted due to lockdowns

Finance minister Nirmala Sitharaman on Monday announced a year’s extension to the production-linked incentive (PLI) scheme for the electronics manufacturing sector.

The scheme, which was launched for five years, between 2020-21 and 2024-25, will now be valid up to 2025-26. This gives a breather to the beleaguered manufacturers who had been impacted due to repeated lockdowns in the last one year.

According to the minister, earlier manufacturers were allowed to claim six per cent incentive for incremental manufacturing during the first year, 2020-21. However, they will now have the option to choose 2021-22 as the first year of the scheme for similar benefits.

In either case, 2019-20 will be considered as the base year to determine the extent of incentives that any manufacturer is entitled to.

The move is aimed at providing relief to companies that could not ramp up their production due to Covid-related disruptions. Apart from lockdowns, restrictions on the movement of goods and personnel along with supply chain bottlenecks delayed their production plans.

 “Companies have been unable to meet incremental production conditions. There was disruption in production activities due to pandemic-related lockdown, restriction on movement of personnel, delay in installation of plant and machinery and disruption in supply chain of components,” said Sitharaman.

According to Rajesh Agarwal, director, Micromax, the extension "offers a much-needed respite to the industry that is reeling under the impact of the pandemic". 

Hari Om Rai, chairman of Lava International, which has availed the scheme for smartphone manufacturing, said it will help in achieving all targets of the PLI like capacity building, job creation and making India a hub for global manufacturing.

“PLI term extension by one more year for mobile phones and electronic components is a big relief for the majority of the approved applicants. The additional one year will enable the applicants to avail the incentive in a more optimum manner and also provide flexibility to manufacturers who have met the current year’s targets,” said Kunal Chaudhary, partner, EY India.

According to Pankaj Mohindroo, chairman of Indian Cellular and Electronics Association, it will boost the fortunes of the local electronics manufacturing sector and help India become an integral part of the global value chain.

Monday’s announcement comes after repeated representations by industry stakeholders, like manufacturers and industry associations, for an extension. Launched in mid-2020, the Rs 40,995-crore PLI for smartphones and components aims to grow local production to Rs 10.5 trillion in five years with Rs 6.5 trillion worth of exports. So far, 16 companies, including global majors like Foxconn, Wistron, Pegatron and Samsung, along with local firms like Lava and Micromax, among others, have secured approval under the scheme.

However, the majority of them had not been able to meet the required targets to claim incentives in 2020-21 due to the lockdowns.

According to the agreement, the foreign players need to invest at least Rs 250 crore and grow production value by Rs 4,000 over the base year (2019-20) on the first year of the scheme to avail a six per cent incentive on the incremental value of their production.

For local players, the first year’s targets are Rs 50 crore in investment and Rs 500 crore of additional production. In the second year, the incremental value of production over the base year, goes up to Rs 8,000 crore for global majors.