Five global and five local firms to be selected for benefits
The government on Tuesday started inviting applications for the Rs 40,995-crore production linked incentive (PLI) schemes to attract global mobile device makers and boost local companies for electronics manufacturing. Firms can apply till July 31 and the selected companies will be announced by early August.
Telecom and IT minister Ravi Shankar Prasad said India will initially aim to attract top five global mobile manufacturing companies and also promote five local firms that will be identified through a screening process. “There are 5-6 large companies that control 80% of the global mobile market. Initially, we will pick up five global champions who under the PLI scheme shall be permitted to participate. “Global and the local will together make India a good manufacturing talented country, supporting the global chain. We will also promote five Indian companies to become national champions,” Prasad said.
The policy broadly has three objectives: attract global lead firms and value chains such as Apple, Samsung, Oppo and Vivo to start manufacturing mobile phones for exports; build Indian champions for global exports, such as Lava, Micromax, Intex, and Karbonn; and attract investments in select electronic components such as semiconductor devices, transistors, PCBs, sensors, SIP, etc.
Under the new policy, which was notified in April, a production-linked incentive scheme replaces the Merchandise Exports from India Scheme (MEIS) which was challenged at the WTO in March 2018 and declared void in October 2019. The new scheme is WTO compliant, since it targets production of phones whose manufacturing value is $200 or above.
Companies will require to meet incremental investments and produce incremental phones over and above FY20 (which has been defined as the base year). Investment and production targets increase over a three-year period and five-year period, respectively.
The scheme will extend an incentive of 4% to 6% on incremental sales over base year of goods manufactured in India and covered under target segments, to eligible companies, for a period of five years subsequent to the base year as defined. Due to this, the domestic value addition for mobile phones is expected to rise to 35% to 40% by 2025 from the current level of 2%-25%.
According to industry estimates, mobile manufacturing companies have the potential to get an incentive of around Rs 7,500 crore if they scale up production to about Rs 1.5 lakh crore over the next five years under the PLI scheme.
The production of mobile handsets in 2018-19 had reached 29 crore units worth Rs 1.70 lakh crore from 6 crore units worth Rs 19,000 crore in 2014. While the exports of electronics has increased from Rs 38,263 crore in 2014-15 to Rs 61,908 crore in 2018-19, India’s share in global electronics production has reached 3% in 2018 from 1.3% in 2012.