With the ministry of electronics and information technology (MeitY) so far not agreeing to roll over incremental sales targets for smartphone production-linked incentive scheme applicants, South Korean major Samsung Electronics has emerged as the only firm to qualify for availing incentives for the first year (FY21).
A total of 10 firms — five global and five local — were selected for the PLI scheme which started in August 2020, and were required to meet the set target for incremental sales of goods in FY21 over the base year, that is, FY20.
Sources said Samsung has been able to clock incremental sales in FY21 over the base year of around Rs 15,000 crore, which is 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. This means Samsung will get Rs 900 crore (6% of Rs 15,000 crore) as incentive from the government for the first fiscal.
Since the other three applicants – Foxconn, Rising Star and Wistron, all contract manufacturers of Apple – in the global category were not able to meet their incremental sales target, they would not get any incentive for the fiscal. Had Samsung crossed the Rs 15,000-crore mark, it would have got even some additional amount as incentive from the unappropriated amount resulting in the under-performance by the other three.
As reported earlier, industry body India Cellular Electronics Association (ICEA) has submitted a proposal to MeitY for rolling over the sales targets for the first year. Samsung, however, is not a member of this body.
The reason cited by ICEA for the rollover is stuck supplies of components, travel restrictions due to suspension of international flights, etc last year due to lockdown, which delayed production by the new units. The proposal for rollover is for units which have met their investment targets but due to reasons beyond their control were not able to meet their sales targets for March 2021.
The advantage Samsung had over the contract manufacturers of Apple was that it had a running factory in India whereas the latter needed to shift units from China.
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.
The formula suggested by ICEA is thus: For FY21 against Rs 4,000 crore, the applicant, say has achieved only Rs 2,000 crore and there is a shortfall of Rs 2,000 crore, as per the recommendation, the company should be paid 6% on Rs 2,000 crore and the balance Rs 2,000 crore, the applicant can opt to add in the incremental turnover criteria in either of the FY22 or FY23. This will ensure that the production targets over the five year period are not reduced. Therefore, the spirit of PLI would remain intact.
The ICEA has now taken the matter of rollover to the finance ministry, Niti Aayog and department for promotion of industry and internal trade (DPIIT). But so far, no decision to grant the rollover has been taken. There’s an empowered committee (EC), which is an inter-ministerial body which has the power to revise incentive rates, target segments, ceilings, and eligibility criteria of the PLI scheme for handsets. It includes the Niti Aayog CEO along with the secretaries of departments of economic affairs, expenditure, revenue, MeitY, DPIIT and the directorate general of foreign trade (DGFT).