India’s production-linked incentive (PLI) scheme for smartphones has reportedly provided
incentives
to
Apple
’s contract manufacturers,
Samsung
, and Dixon Technologies. According to a report in Economic Times, these companies, along with Foxconn (Hon Hai), Wistron (now owned by the Tata group), and Pegatron, are set to receive Rs 4,400 crore-plus in incentives for achieving targets in FY23 through the Indian government’s
PLI scheme
for smartphones.
However, due to some selected companies not meeting production targets outlined in the scheme, the originally planned outlay of Rs 6,504 crore for FY24 will not be fully utilised. Companies receive incentives a year after meeting the targets. Those exceeding the targets can claim additional benefits from the residual amount not claimed by the companies that failed to meet the targets.
The companies that couldn't meet the PLI target
Among global companies, Rising Star (Bharat FIH), a
smartphone
contract manufacturer for China’s Xiaomi, is reported to have consistently failed to meet the target since the inception of the PLI scheme in FY21 and is likely to continue this trend in FY23 as well. Also, Indian companies like Lava and Optiemus Electronics, which have not met PLI targets even once, are unlikely to receive incentives.
The smartphone companies mentioned in the report did not respond to emailed queries sent by the financial daily. According to sources, since four out of five global companies met the targets in FY23, the disbursement in FY24 will be the highest yet under the scheme. So far, the government has allocated approximately Rs 2,500 crore under the scheme. Of this, Rs 500 crore has been given to Samsung for achieving targets in the first year, while Rs 1,700-2,000 crore has been distributed among the three contract manufacturers of Apple and Dixon.
The smartphone PLI scheme offers graded incentives in the form of cashbacks at 6% of incremental sales of goods for each of the first two years, 5% for the third and fourth years, and 4% for the fifth year.
Overall financial outlay for the smartphone PLI scheme was reduced to Rs 38,601 crore over five years from the original Rs 40,951 crore. This Rs 2,350 crore difference was reportedly utilised for the IT hardware scheme. Since its start in FY21, the scheme was amended after most beneficiaries failed to meet the targets in the first year, barring Samsung.
The scheme’s tenure was extended to six years with the condition that companies can claim benefits for five years of their choice. The scheme ends in FY26 for every company other than Samsung, for which FY25 is the last year. The incentives will be cleared by FY27.
How Samsung, Apple and others qualify for the PLI scheme
To qualify for the PLI benefits, companies such as Samsung and Apple’s contract manufacturers need to invest a minimum of Rs 250 crore in the first year of the scheme and a similar amount in each of the next three years. In terms of production, the companies need to manufacture incremental goods (mobile phones with invoice value of Rs 15,000 and above) worth Rs 4,000 crore, Rs 8,000 crore, Rs 15,000 crore, Rs 25,000 crore and Rs 50,000 crore in the final year of the scheme.
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