Manufacturers of electronics goods are struggling to meet the target set by the Centre to be eligible for the production-linked incentive (PLI) scheme. In a letter to the government on 27 March, the India Cellular and Electronics Association (ICEA) said 15 out of the 16 PLI applicants may not be able to fulfil the target.
The PLI scheme, which was launched to boost local manufacturing, offers Indian companies 4-6% cash incentives for incremental sales over the base year of 2019-20.
“During our review meeting of the PLI scheme with stakeholders, we are informed that except one, all other smartphone PLI applicants, in spite of their best efforts, are facing numerous challenges in fulfilling the qualification criteria of the scheme in FY21.”
The ICEA has also requested the Centre to revise the base year to FY21 and pay the PLI benefits till FY26.
Local mobile handset manufacturers, including Padget Electronics, Lava International and Opteimus Electronics, and foreign companies such as Foxconn Hon Hai, Rising Star, Wistron, Pegatron and Samsung, had applied for PLI benefits.
According to industry insiders, electronics manufacturers are facing challenges as demand for chips far outweighs supply. Semiconductor manufacturers globally have been struggling to keep up with the post-pandemic demand. Besides, the sanctions placed on Chinese telecom giant Huawei by the US have also affected supply of chips.
In a letter to the ministry of electronics and information technology (MeitY), the ICEA said the pandemic has impacted the entire industry.
“There is difficulty in meeting targets because of a series of events, the latest being chip shortage. Even if one chip is short, you cannot load the product on to the production line, because it is so highly automated,” said George Paul, the chief executive of Manufacturers’ Association for Information Technology in India (MAIT).
China’s early recovery from the pandemic has also impacted the supply of components and equipment for other companies. “China, at this time, was exporting finished goods to meet a sharp hike in global demand and placed undue restrictions on export of components, since its own industry was short on components in the face of an expected steep rise in global demand starting August 2020,” the ICEA said.
Travel restrictions, delays in supply of capital goods, and a global shortage of containers are other reasons for failures in meeting targets. “If we’re short by 100 million, allow us to cover it next year. Things like that have to be worked out,” said Paul. “Having brought out the PLI you have to be flexible, particularly in this industry which is so fluid and dynamic. In some of the traditional industries things don’t change very fast, you have more time. Here, if you bring out a phone three months late, you’re as good as a dead duck. The openness to take input from industry on the challenges and taking quick decisions is critical for PLI to succeed.”
Under the scheme, which was announced in October, companies were asked to meet targets by 31 March. Livemint