The government is examining whether South Korean major Samsung Electronics used inter-company transfer of phones to inflate invoices to claim higher incentives for FY21 under the smartphone production-linked incentive (PLI) scheme.
Official sources said global companies like Samsung need to make phones priced higher than Rs 15,000 to be eligible to claim incentives under the scheme apart from meeting incremental production and sales target. Samsung was the only company to meet the target and claim incentives worth Rs 900 crore for FY21.
However, officials examining the invoices feel the amount could be inflated as the company may have used inter-company transfer to include even phones of lower value.
“This is under examination and we have asked the company to produce all the papers concerned before us,” a government official involved in examining the invoices said.
Such inter-company transfer is not possible in the case of another global manufacturer selected under the PLI scheme, Apple, as in its case the phones are made by contract manufacturers like Wistron and Foxconn and transferred to Apple.
FE was the first to report on September 13, 2022, that disbursement of incentive amount to Samsung was stuck due to discrepancies found by the government in its invoices.
“At the moment we cannot say by when the incentive amount would be disbursed to the company and how much,” officials said.
When contacted, a Samsung India spokesperson said, “Samsung is a committed partner of India for over 26 years. As the leading smartphone player, we have been working closely with various stakeholders to make the PLI scheme a success. We are currently in discussions with Government of India on the incentive payout.”
The government recently approved incentives worth Rs 357.17 crore for the August 2021-March 2022 period for Foxconn. Similarly, among domestic companies, Dixon’s Padget has received approval for incentives worth Rs 58.29 crore for the January-March 2022 quarter. It had earlier received incentives worth Rs 53.28 crore for the August-December 2021 period.
For Apple’s contract manufacturers, FY22 is the first year of PLI benefits, since the government rolled over the tenure of the scheme by a year for companies which were not able to meet the first year (FY21) targets due to Covid-led disruptions in the supply chain.
Ten firms — five global and five local — have been selected for the PLI scheme which started in August 2020. They were required to meet a set target for incremental sales of goods in FY21 over the base year, FY20.
Industry sources said that during FY21, Samsung was able to clock incremental sales of around Rs 15,000 crore, which was also the ceiling for availing the incentive.
The total outlay for smartphone PLI over five years is Rs 40,951 crore and the incentive ranges around 4-6% annually. For FY21, the total incentive was of Rs 5,334 crore. The threshold for qualifying for the incentive was incremental sales of Rs 4,000 crore and maximum Rs 15,000 crore. According to this, Samsung was entitled to get Rs 900 crore (6% of Rs 15,000 crore) as incentive from the government for FY21.
The PLI scheme for smartphones has set different targets for global players like Apple and Samsung against Indian players like Dixon. In the first year global 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 global 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.