Production Linked Incentive (PLI) Scheme for Mobile Phone Manufacturing

India is rapidly emerging as a global player in electronics manufacturing, with the government taking proactive steps to boost domestic production and attract investments. One of the most significant initiatives in this direction is the Production Linked Incentive (PLI) Scheme for Large Scale Electronics Manufacturing, launched by the Ministry of Electronics and Information Technology (MeitY) on April 1, 2020. This scheme is a game-changer for the electronics industry, particularly for mobile phone manufacturing, as it aims to create a robust ecosystem for Electronics System Design and Manufacturing (ESDM) in India.

In this blog, we will explore the PLI Scheme for mobile phone manufacturing, its objectives, eligibility criteria, application process, and how it is set to transform India’s electronics manufacturing landscape.

What is the PLI Scheme? 

The Production Linked Incentive (PLI) Scheme is a financial incentive program designed to encourage domestic manufacturing and attract large-scale investments in the electronics sector. The scheme offers 4% to 6% incentives on incremental sales of goods manufactured in India over the base year (FY 2019-20). It specifically targets mobile phones and specified electronic components, aiming to reduce India’s dependence on imports and boost local production.

The scheme is part of the National Policy on Electronics (NPE 2019), which envisions India as a global hub for ESDM by fostering innovation, developing core components like chipsets, and creating a competitive environment for the industry.

Objectives of the PLI Scheme 

The PLI Scheme has been introduced to address key challenges faced by the electronics manufacturing sector in India, such as:

High Capital Investment: Electronics manufacturing requires significant financial resources, which can be a barrier for many companies.
Technological Advancements: Rapid changes in technology demand continuous innovation and adaptation.
Level Playing Field: The Indian electronics sector faces a competitive disadvantage compared to other manufacturing economies due to factors like high logistics costs, inadequate infrastructure, and limited R&D capabilities.
Reducing Import Dependency: With domestic demand for electronics hardware expected to reach INR 26,00,000 crore (USD 400 billion) by 2025, the scheme aims to reduce the foreign exchange outflow caused by imports.

Who Can Apply for the PLI Scheme? 

The PLI Scheme is open to companies engaged in manufacturing mobile phones and specified electronic components in India. The eligibility criteria are as follows:

Target Segments

Mobile Phones:
- Mobile phones with an invoice value of INR 15,000 and above.
- Mobile phones manufactured by domestic companies (owned by resident Indian citizens as per the FDI Policy Circular of 2017).
Specified Electronic Components:
- Components such as SMT components, discrete semiconductor devices, passive components, PCBs, sensors, transducers, actuators, and more (detailed in Annexure B of the notification).

Eligibility Thresholds

To qualify for the scheme, companies must meet specific thresholds for incremental investment and incremental sales of manufactured goods over the base year. These thresholds vary depending on the target segment:

Mobile Phones (Invoice value of INR 15,000 and above):
- Incremental investment: INR 1,000 crore over 4 years.
- Incremental sales: INR 4,000 crore in Year 1, increasing to INR 25,000 crore by Year 5.
Mobile Phones (Domestic Companies):
- Incremental investment: INR 200 crore over 4 years.
- Incremental sales: INR 500 crore in Year 1, increasing to INR 5,000 crore by Year 5.
Specified Electronic Components:
- Incremental investment: INR 100 crore over 4 years.
- Incremental sales: INR 100 crore in Year 1, increasing to INR 600 crore by Year 5.

Legal Contours of the PLI Scheme

The PLI Scheme is governed by specific legal and procedural guidelines:

Base Year: FY 2019-20 is the base year for calculating incremental investment and sales.
Tenure: The scheme will provide financial incentives for five years starting from August 1, 2020.
Application Period: Initially, applications were open for four months, but the scheme may be reopened during its tenure based on industry response.
Incentive Outlay: The total incentive outlay for the scheme is INR 40,951 crore over five years, with annual allocations as follows:
- Year 1: INR 5,334 crore
- Year 2: INR 8,064 crore
- Year 3: INR 8,425 crore
- Year 4: INR 11,488 crore
- Year 5: INR 7,640 crore

Application and Approval Process 

The application process under the PLI Scheme is designed to be transparent and efficient. Here’s how it works:

Submission of Application: Companies registered in India can submit their applications to the designated Nodal Agency. Each application must be complete and submitted within the stipulated timeframe.
Acknowledgment: After initial scrutiny, an acknowledgment will be issued. However, this does not guarantee approval under the scheme.
Appraisal: The Project Management Agency (PMA) will appraise eligible applications and verify their compliance with the scheme’s requirements.
Approval: The Empowered Committee (EC), comprising senior officials from various government departments, will review and approve eligible applications.
Disbursement: Incentives will be disbursed to companies that meet the required thresholds for incremental investment and sales, and whose claims are verified by the PMA.

Where to Apply?

Applications for the PLI Scheme can be submitted to the Nodal Agency, which acts as the Project Management Agency (PMA). The PMA is responsible for:

Appraising applications and verifying eligibility.
Examining claims for disbursement of incentives.
Compiling data on the scheme’s progress and performance.

Detailed guidelines for the application process are issued by MeitY in consultation with relevant departments. Companies interested in applying should refer to the official notification and guidelines for complete information.

Conclusion

The PLI Scheme for Mobile Phone Manufacturing is a landmark initiative that aims to transform India into a global leader in electronics manufacturing. By offering financial incentives and addressing key challenges faced by the industry, the scheme is set to attract large-scale investments, boost domestic production, and reduce reliance on imports. It also aligns with the government’s vision of making India a self-reliant economy under the Aatmanirbhar Bharat initiative.

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Source: Ministry of Electronics & IT

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