Handset Makers Want A 2-3 Month Extension On PLI Targets Amid Supply Crunch, Pandemic


The handset makers, reeling from an acute component shortage of chipsets and pandemic-related delays in capacity expansion, want a 2-3 month extension to meet the investment and the production targets for the first year under the government’s ambitious scheme to push local manufacturing and exports.

“The industry is suffering right now as there is a shortage of semiconductor chips and raw materials and it is already impacting the targets,” Pankaj Mohindroo, chairman India Cellular and Electronics Association (ICEA), told ET.

As a result, handset makers say, even though exports this year would exceed last year’s Rs 27,400 crore(US$3.69million, it would fall short of the industry’s targeted Rs 50,000 crore.

India’s telecom sector, in the efforts of enabling policies including more quantum of the spectrum, is set to establish new benchmarks in the next-generation network deployments and service delivery.

Executives say handset makers are likely to shortly write to the government on the need for an extension of the PLI target timelines.

In early October approved the government cleared 10 companies to avail of benefits under the production-linked incentive or PLI scheme – five foreign firms including two units of Foxconn, Wistron, Pegatron and Samsung and Indian companies Lava, Micromax, Karbonn, Dixon and Optiemus.

Under the PLI scheme, the target for incremental investment over base year for foreign companies is Rs 250 crore in the first year, only for phones with an invoice value of Rs 15,000 and above. For domestic companies it is Rs 50 crore for any phones produced.

The target for incremental sales of manufactured goods over base year is Rs 4,000 crore each for foreign companies while for domestic companies, it is Rs 500 crore. Proposed incentive rate in the first year for both domestic as well as foreign companies is 6%.

Industry fears that the targets would be difficult to meet, with the severe global component shortage set to last at least till the end of this fiscal year through March 31, 2021.

“Huawei had to procure their two years’ demand of chips as there was an embargo on semiconductor supply to them from US after September 30, 2020,” and executive said, asking to be anonymous, adding that this had led to a severe shortage in supply for the rest of the players.“Certain suppliers have cut the supplies to our Indian companies by 97% in certain cases.”

Another reason cited was the late issuance of letters to participants granting approval for their PLI applications.

“Letter to the industry intimating it about their qualification in the scheme was issued on October 7, 2020. Therefore, the industry got very little time to negotiate, select, order, procure and install all the machinery and equipment within such short duration,” another industry executive explained. This delay affected particularly companies that had to procure brand new equipment.

The general lead-time of machinery and equipment is 4-5 months but during this pandemic year, the lead time for supply of machines has also been extended by two months in some cases, industry executives say.

With a corpus of Rs 41,000 crore to be spread over five years period, the PLI scheme offers an incentive of 4 per cent to 6 per cent on incremental sales of handsets over base year which is FY19-20.

ET had earlier reported that the scheme was expected to start in August but was delayed by two months, raising questions on whether companies could meet their March-end production targets. The delay was on account of differences over whether the Cabinet approval was needed for the scheme since it entails investments over Rs 1,000 crore.

While the industry was hoping the government took the delay into account while setting the targets, the ministry didn’t budge.

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