The production-linked incentive (PLI) scheme worth Rs 40,995 crore for mobile phone manufacturing is set to provide an impetus to local firms like Micromax, Karbonn, Intex, Lava, etc, to regain their hold and business in the market. The government will provide incentives to only 10 firms initially, of which five will be local firms.
As per officials, the PLI scheme will help local companies to make a comeback in the mobile phone business in the country, while also benefitting big players like Apple and Samsung to increase their production capacity here. Over the past couple of years, local players like Micromax, Karbonn, Intex and Lava have ceded market share to Chinese companies like Xiaomi, Lava, Oppo, etc. In fact, majority of the phones in the sub- Rs 15,000 category are sold by Chinese companies, a category which was earlier dominated by Indian firms. As per Counterpoint, 75% of the mobile phones which are sold in India are under Rs 15,000.
The government is trying to reverse the Chinese dominance through a ‘designed distortion’ in the PLI scheme. As per the scheme, international companies will get the incentive on mobile phones that have an invoice value of `15,000 and above, whereas no such eligibility threshold is required for domestic companies. Due to the eligibility threshold, global firms like Apple, Samsung, OnePlus, etc, will be major beneficiaries as they are into high-end phones, while others like Xiaomi, Itel, Realme, Oppo, etc, will lose out as these firms primarily cater to the Rs 15,000 segment.
The PLI scheme extends an incentive of 4% to 6% on incremental sales over base year (2019-20) of goods manufactured in India and covered under the target segments to eligible companies for a period of five years subsequent to the base year. As only five global firms will be selected initially for the scheme, many of the Chinese firms are set to lose out while Indian firms will get an option to re-emerge. The government has also kept investment criteria lower for domestic companies.
For instance, domestic companies have to invest Rs 50 crore initially and Rs 200 crore incrementally over four years to avail incentives, while the international firms need to invest Rs 250 crore initially and Rs 1,000 crore over four years to get benefits under the scheme.
Officials in the government feel that the PLI scheme will help make India a top manufacturer of mobile phones in the world. India became the world’s number 2 maker of mobile phones in 2017, surpassing Vietnam.
As per computer hardware industry MAIT, the mobile manufacturing industry is very positive about the government’s move and this will certainly lead to companies moving their supply chains to India. “To increase the job creation, component manufacturing needs to be moved too. This will not only spur manufacturing, but will make India an export-led global manufacturing hub for mobile phones,” MAIT said.
