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Why are cellphone makers seeking lockdown-hit FY21 as zero year for PLI

The Indian Cellular and Electronics Association (ICEA) has written letters to the NITI Aayog, the Secretary of the Ministry of Electronics and Information Technology, as well as officials from other ministries to consider declaring 2020-21 as zero year for production-linked incentive (PLI) scheme for manufacturing of mobile phones.

What does zero year mean in PLI scheme for mobile phone manufacturing?

Unlike other incentives for establishing manufacturing units in India, PLI schemes for all sectors that have been announced since April last year envisage incentives on achievement of a minimum threshold of cumulative incremental investment and incremental sales of manufactured goods net of taxes.

While the rates of incentives vary sector-wise, the achievement of a minimum threshold of cumulative incremental investment means that all companies will have to invest a certain amount of money in addition to the investments they have already made before the PLI scheme is notified. Only the additional funds invested by the company in setting up of a new plant or expansion of an existing plant would qualify for getting the incentive.

Apart from the incremental capital expenditure, the PLI scheme also seeks that the companies achieve incremental sales of products manufactured either from a new plant or the expanded unit of the same plant. Like all schemes, even in the case of PLI for mobile handset manufacturing, both these parameters are applicable for companies to be eligible to get the incentives.

Since the government notified the PLI for mobile manufacturing on April 1 last year, FY21 was considered as the base year for the calculation of incremental investments and sales, and therefore the incentives to be given to companies.

How does 2020-21 being considered as zero year help cellphone makers?

For the purposes of calculation of incremental investment, incremental sales of manufactured goods net of taxes and therefore the incentives, cellphone companies have urged the government that the current financial year be considered as zero year. In essence, they say that for the purposes of calculation of the incentives to be given to under the PLI scheme, the government should consider the incremental investments they will make and sales of products that they achieve from next financial year.

While the companies have attributed several reasons for it, the most common claim is that the lockdown in the first three months of this fiscal left them with very little time to get started with the building of or expansion of old units.

Apart from this, the companies have cited lack of skilled labour and other resources as hindrances in meeting the targets for the first year. These companies also pointed out the paucity of time due to delayed approvals for requisite land clearances for expanding and setting up new units. Indian Express

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