Government allocates over Rs 4,400 crore to Apple, Samsung & other smartphone manufacturers under PLI scheme

PLI scheme: Apple‘s three Indian contract manufacturers – Foxconn (Hon Hai), Wistron (now owned by Tata group), and Pegatron – alongside Samsung from South Korea and domestic electronics company Dixon Technologies are slated to receive over Rs 4,400 crore in incentives for achieving targets in FY23 through India’s production-linked incentive (PLI) scheme for smartphones.

However, officials familiar with the details told ET that due to some of the 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 used. Companies receive incentives a year after meeting targets. Companies exceeding targets may claim additional benefits from the unclaimed amount by firms failing to meet targets.

Rising Star (Bharat FIH), a smartphone contract manufacturer for China’s Xiaomi, has 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.

Indian companies like Lava and Optiemus Electronics, which have not met PLI targets, are unlikely to receive incentives, officials said. The smartphone companies mentioned in the report did not respond to emailed queries sent by the financial daily.

One of the sources mentioned that since four out of five global firms met the targets in FY23, the disbursement in FY24 will be the highest yet under the scheme.

Up to now, 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.

Samsung has filed claims for meeting targets for the third year after failing to achieve numbers in the second year of the scheme. The company is claiming benefits for the third year, while others are doing so for the second year. FY23 incentives are for targets achieved in the fiscal year ending March 31.

Encouraged by the PLI scheme, mobile phone exports reached $10.5 billion during April to December 2023. Electronics, which was previously ranked ninth in export categories, has jumped to the fifth rank since the scheme’s launch in 2021.

The India Cellular and Electronics Association (ICEA) predicts mobile phone exports to reach $14-15 billion by the end of the fiscal year.

The smartphone PLI scheme offers graded incentives in the form of cashbacks, starting at 6% of incremental sales for the first two years, 5% for the third and fourth years, and 4% for the fifth year.

The overall financial outlay for the scheme was reduced to Rs 38,601 crore over five years from the original Rs 40,951 crore, with the difference used for the IT hardware scheme.

To be eligible for benefits, companies like Samsung and Apple’s contract manufacturers must invest at least Rs 250 crore in the first year and the same amount each year for the following three years. Regarding production, global companies must make additional goods (mobile phones valued at Rs 15,000 and above) totaling 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.

Since its inception in FY21, the scheme underwent revisions due to most beneficiaries failing to meet targets in the first year, except Samsung. The scheme’s duration was extended to six years, allowing companies to choose any five years for claiming benefits. For every firm except Samsung, the scheme concludes in FY26, while for Samsung, it ends in FY25. Incentives will be settled by FY27.