Four out of 10 firms selected under the smartphone Production Linked Incentive (PLI) scheme are not likely to achieve incremental sales targets for FY22, even as a few others are likely to record bumper sales. Apple’s contract manufacturers Foxconn, Wistron and Samsung are likely to exceed incremental sales targets for FY22. Samsung will be availing benefits for the second year, as it was the only firm to meet sales targets last year. All the others will be claiming benefits for the first year.
The government had increased the scheme’s tenure to six years from five, after most selected firms failed to meet sales targets in the first year. Since incentives can be given for five years, they were given the option to choose any of the five years during the six-year tenure to meet the targets and claim financial incentives.
Among the global firms that are not going to meet sales target for FY22 are Pegatron and Rising Star. According to sources, while Pegatron, a contract manufacturer for Apple, is yet to start production, Rising Star is manufacturing devices for players like Xiaomi, with invoice value of less than Rs 15,000, making it ineligible to claim benefits. In the domestic category, Micromax and Optiemus are not likely to meet the incremental sales target, the sources added.
The total outlay for smartphone PLI was set at Rs 40,951 crore over five years and the incentive ranges between 4% and 6% annually. The scheme has set different targets for overseas manufacturers and Indian ones. In the first year, overseas players were required to make an investment of Rs 250 crore and the threshold for qualifying for incentives was incremental sales of Rs 4,000 crore, and the maximum was Rs 15,000 crore. Phones made by overseas players should have an invoice value of over Rs 15,000. In the case of Indian players, the investment target was Rs 50 crore and they were required to manufacture phones worth Rs 500 crore in the first year.
The three global firms that may exceed the sales target will get an additional amount as incentive from the unappropriated amount, resulting in the under-performance by the two. The three domestic firms — Lava, Padget (Dixon) and United Telelinks (Karbonn) may get additional incentives in case they exceed the sales target.
To claim incentives, global companies need to achieve minimum incremental sales of Rs 4,000 crore in the first year, Rs 8,000 crore in second year, Rs 15,000 crore in third year, Rs 20,000 crore in the fourth year and Rs 25,000 crore in the fifth year. For local companies, the incremental sales targets are Rs 500 crore in the first year, Rs 1,000 crore in second year, Rs 2,000 crore in third year, Rs 3,500 crore in the fourth year and Rs 5,000 crore in the fifth year.