Level playing field to be made for Samsung & Apple vendors

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Updated: June 21, 2021 8:19 AM

Official sources said that the base year for over which the investment and incremental sales target would be calculated would remain same for all the firms.

apple samsungSamsung, having touched the ceiling, would thus get Rs 900 crore (6% of Rs 15,000 crore) as incentive for FY21.

The government will create a level play field between smartphone manufacturers who have met their year one (FY21) sales target and the ones who have not and therefore need a one year extension to avail financial incentives under the production-linked incentive scheme. Official sources said that the base year for over which the investment and incremental sales target would be calculated would remain same for all the firms.

Since the government is considering extending the tenure of the PLI scheme to six years from the current five, both the sets of manufacturers would have the option of choosing any of the five years during the six year tenure to meet the targets and claim financial incentives.

For instance, South Korean manufacturer, Samsung Electronics, which has met the targets for the first year, can claim incentives on the incremental sales over the base year, ie, FY20. The threshold for qualifying for incentive was incremental sales of Rs 4,000 crore and the maximum was Rs 15,000 crore. Samsung, having touched the ceiling, would thus get Rs 900 crore (6% of Rs 15,000 crore) as incentive for FY21.

For others like the contract manufacturers of Apple — Foxconn, Rising Star, and Wistron — which have not been able to meet the target, FY21 would be treated as zero year. But for claiming the incentive in FY22, these manufacturers need to achieve incremental sales target based on FY20 numbers. But for Samsung, the FY22 targets will double as it will be the company’s second year.

It is here that the government needs to create a level playing field between others and Samsung so that the latter does not face stiffer targets despite having met the year one numbers. Officials said that Samsung would therefore have the option to term any of the year in which it is unable to meet the target as zero year and claim the benefits next year. For instance, its target in FY22 would be higher than others. In the event it is not able to meet them during the year, it can declare the year as zero year and in FY23, its targets would be similar to that of others.

To claim incentives, global companies need to achieve minimum incremental sales of Rs 4,000 crore in first year, Rs 8,000 crore in second year, Rs 15,000 in third year, Rs 20,000 crore in fourth year and Rs 25,000 crore in fifth year. For local companies, the incremental sales targets are Rs 500 crore in first year, Rs 1,000 crore in second year, Rs 2,000 crore in third year, Rs 3,500 crore in fourth year and Rs 5,000 crore in fifth year.

As is known, the total outlay for smartphone PLI is Rs 40,951 crore and the incentive ranges between 4-6% annually. The PLI scheme has set different targets for overseas manufacturers like Apple and Samsung and Indian players like Lava and Micromax. In the first year – FY21 – overseas players were required to make an investment of Rs 250 crore and manufacture goods worth Rs 4,000 crore more than the previous year. The phones made by overseas players should have an invoice value of over Rs 15,000. In the case of Indian players, the investment target is Rs 50 crore and they were required to manufacture phones worth Rs 500 crore in the first year.

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