Breather for electronics manufacturers as govt extends PLI by a year

Finance minister Nirmala Sitharaman on Monday announced a year’s extension to the production linked incentive (PLI) scheme for the electronics manufacturing sector. The scheme, which was launched for five years, between 2020-21 2024-25, will now be valid till 2025-26, offering a breather to the beleaguered manufacturers who had been impacted due to repeated lockdowns in the last one year.

According to the minister, while manufacturers were earlier allowed to claim six per cent incentive for incremental production during the first year, 2020-21, they will now have the option to choose 2021-22 as the first year of the scheme for similar benefits. In either case, 2019-20 will be considered as the base year to determine the extent of incentive that any manufacturer is entitled to.

The move is aimed at providing relief to companies that could not ramp up their production levels due to Covid-related disruptions. Apart from lockdowns, restrictions on movement of goods personnel supply chain bottlenecks delayed their production plans.

“Companies have been unable to meet incremental production conditions. Disruption in production activities due to pandemic related lockdown, restriction on movement of personnel, delay in installation of plant machinery disruption in supply chain of components,” said Sitharaman.

According to Hari Om Rai, chairman of India-based Lava International, which has availed the scheme for smartphone manufacturing, the extension will help in achieving all targets of the PLI like capacity building, job creation by making India a hub for global manufacturing.

“PLI term extension by one more year for mobile phones electronic components is a big relief for the majority of the approved applicants. The additional one year shall enable the applicants to avail the incentive in a more optimum manner also provide flexibility for manufacturers who have met current year’s targets,” said Kunal Chaudhary, partner, EY India.

According to Pankaj Mohindroo, chairman of Indian Cellular Electronics Association, it will boost the fortunes of the local electronics manufacturing sector help India become an integral part of the global value chain.

Today’s announcement comes after repeated representations by the industry stakeholders such as manufacturers industry associations like ICEA for an extension. Launched in mid-2020, the Rs 40,995 crore PLI for smartphones components aims to grow local production to Rs 10.5 trillion in five years with Rs 6.5 trillion worth of exports. So far, 16 companies, including global majors like Foxconn, Wistron, Pegatron Samsung, local firms like Lava Micromax, among others, have secured approval under the scheme.

However, the majority of them had not been able to meet the required targets to claim incentives in 2020-21 to lockdowns that forced them to scale down production repeatedly. As per agreement, foreign players need to invest at least Rs 250 crore grow production value by Rs 4,000 over the base year (2019-20) on the first year of the scheme to avail a six percent incentive on the incremental value of their production. While, for local players the first year’s targets are Rs 50 crore in investment Rs 500 crore of additional production. In the second year, the incremental value of production over base year, goes up to Rs 8,000 crore.

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