Most electronics companies approved by India under the production-linked incentive (PLI) scheme for IT hardware say they will not be able to meet their first-year targets due to global supply chain disruptions and “inadequate incentives” under the scheme.
They have now reportedly asked the government to almost triple the total incentive corpus to around Rs 20,000 crore ($2.67 billion) and increase the average rate of incentive from 2.3% to 5%.
The Indian government has approved 14 companies under the PLI scheme with an incentive corpus of $980 million.
According to a report by the Economic Times, Dell and domestic vendors Micromax and Dixon are expected to meet their first-year targets for the fiscal year ending March 31.
However, global players like Wistron, Flextronics and Foxconn’s Bharat FIH that were approved by the government to make laptops, tablets, all-in-one personal computers (PCs) and servers will not be able to meet their targets.
India had also approved ten companies under the domestic category. Players like Lava, Infopower Technologies (JV of Sahasra and MiTAC), Neolync, Optiemus, Netweb, Smile Electronics, VVDN and Panache Digilife are unlikely to meet their targets.
As per the scheme, global players need to show net incremental sales $134 million to be eligible for the first-year incentive of 4% in cashbacks, while for local companies, the target was $6.7 million.
The India Cellular & Electronics Association (ICEA) and Manufacturers Association for Information Technology (MAIT) have informed the government regarding the demands.
Both associations have said that the incentives “do not compensate for the disabilities of shifting production to India” of duty-free products like laptops, tablets and data servers from countries like China, Taiwan and Vietnam.
Pankaj Mohindroo, chairman of ICEA, which represents Apple, Lava and Foxconn, among others, said that IT hardware as a manufacturing category performed “very poorly” and the PLI scheme has had limited success.
Mohindroo, however, added that all efforts were being made to energize global value chains (GVCs) such as Apple, HP, Dell and Acer to make India a global manufacturing hub with output reaching $30 billion by 2026.
MAIT president Nitin Kunkolienkar told the publication that the government needs to do more to incentivize manufacturing of electronic hardware in the country.
According to the report, all companies approved under the scheme cumulatively pledged to produce goods only up to minimum eligibility threshold or goods worth $21.33 billion, including $8 billion in exports over the scheme’s four-year period.
Their commitment was far lower than expected by the government, which had initially made the estimate of achieving production output worth $43 billion, with exports expected to be worth $32.6 billion.