Mobile phone makers likely to miss production target under PLI scheme, seek adjustment of incentives

Mobile phone manufacturers, including Samsung and Apple's vendors, are likely to miss the production target of the current financial year under the production linked incentive (PLI) scheme and have approached the government to roll over timelines of the scheme.

The government in October had cleared 16 proposals from domestic and international companies entailing investment of ₹11,000 crore under the PLI scheme to manufacture mobile phones worth ₹10.5 lakh crore over the next five years.

The companies include iPhone maker Apple's contract manufacturers Foxconn Hon Hai, Wistron and Pegatron, apart from Samsung and Rising Star.

Mobile devices industry body ICEA, whose members include Apple, Foxconn, Wistron, Lava etc, wrote to Electronics and IT Secretary Ajay Prakash Sawhney on December 24 that there will be a shortfall in targets under the PLI scheme due to shortage of chips coupled with supply constraints posed by the Covid-19 pandemic.

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"The PLI applicants are working very furiously and with everything possible at their command to fulfil the targets. Many of them will be able to complete it but not before early financial year (FY) 2021-22, and a handful will even be able to complete by March 2021. However, they are skating on thin ice because there could be many slips in these extraordinary circumstances," ICEA chairman Pankaj Mohindroo said in the letter.

The India Cellular and Electronics Association (ICEA) cited a shortage of electronic chips in the global market due to Chinese technology major Huawei purchasing two-year stock of the component to averse impact of US ban on the company effective from September 2020.

"We have come to know that the suppliers have cut supplies to our Indian companies by 97% in certain cases," Mohindroo said.

The ICEA said that the operations of several companies were hit four months before the PLI scheme started due to international flight ban along with other logistics issue and the applicants got very little time to negotiate, select, order, procure and install all the machinery and equipment after they were given scheme qualification letter on October 7.

The industry body has requested the government to adjust timelines for incentive under the PLI scheme without compromising on the five year target set under it.

The ICEA has proposed to reward companies who meet their target during the current fiscal and give PLI on incremental production to companies that meet investment targets and base production irrespective of whether thet have met the incremental turnover target for FY 2020-21.

"Shortfall for the FY 2020-21, if any, may be added to the inncremental targets to te annual incremental targets in any one out of the subsequent two years i.e., FY 2021-22 or FY 2022-23 at the choice of the applicant," Mohindroo said.

According to ICEA, if a company achieves only ₹2,000 crore incremental target for current fiscal against ₹4,000 crore, then the company should be paid 6% on ₹2,000 crore and it should be allowed to add the balance 2,000 crore in FY'22 or FY'23  for incentives.

"This will ensure that the production targets over the five year period are not reduced. Therefore, the spirit of the PLI remains intact," Mohindroo said.

Industry sources said that Samsung is likely to meet the target and hence not approached the government for adjustment in the scheme.

Samsung is planning to produce mobile phones worth ₹3.7 lakh crore in India over the next five years which includes manufacturing smartphones worth ₹2.2 lakh crore, priced above ₹15,000 per unit, under the scheme.

Email query sent to Samsung did not elicit any reply.