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Companies welcome government’s PLI-scheme, but work still to be done

At the moment, the industry mostly gets semi knocked down (SKD) units of phones into the country and assembles them here, claiming duty benefitsPremium
At the moment, the industry mostly gets semi knocked down (SKD) units of phones into the country and assembles them here, claiming duty benefits

  • Recent reports suggest that Apple is planning to bring nearly a fifth of its production capacity to the country in the next five years, which is how long the PLI scheme is for
  • In the short to medium term, India can present a viable alternative to China in the next 5 years

The Indian government’s new production linked incentive (PLI) scheme for mobile manufacturers has been well received by the industry, but there’s work left to be done. The scheme is meant to encourage companies to export products from the country and ramp up manufacturing here.

Pankaj Mohindroo, Chairman of the India Cellular and Electronics Association (ICEA), said the companies have reacted “very positively" and the scheme could help meet the targets set in the National Policy on Electronics 2019 (NPE 2019).

“All major companies are already in India, producing 97% of India’s domestic requirement. Only the component base has to come to India, which is not necessarily about shifting but of setting up additional capacities. This is the most appropriate time for setting up capacities in India," Mohindroo said.

At the moment, the industry mostly gets semi knocked down (SKD) units of phones into the country and assembles them here, claiming duty benefits. However, the new PLI-scheme is amongst the first steps by the government that will allow completely knocked down (CKD) units to be brought here, spurring the growth of component manufacturing for mobile phones.

Recent reports suggest that iPhone giant Apple is planning to bring nearly a fifth of its production capacity to the country in the next five years, which is how long the PLI scheme is for. However, in order to manufacture products here fully and consequently export them to other nations, more incentives will be required.

While Mohindroo called the PLI-scheme a “heavy hitter", he did say challenges like the availability of ready to move in buildings remain. Nitin Kunkolienker, President, MAIT, pointed out more issues that companies may and will face in India, including congested ports, slow turnaround times, and more.

“I’m sure many more companies would like to move their supply chains to India, at least partially if not fully," Kunkolienker said. “But, higher employment and economic activity will happen if we start moving the component manufacturing across the value chain, like plastic moulding, metal products etc," he added.

That said, Kunkolienker said that ease of doing business in India is only on paper right now. “I have not seen any ease of doing business in most states," he said. “The Government of India should come with an electronic manufacturing mission," he added, drawing a parallel to the Software Technology Parks of India which promotes the export of software from the country.

States like Andhra Pradesh, West Bengal, Punjab etc. have huge industrial potential, according to Kunkolienker, but they are in contradiction with the government. He called for state engagement and said they need to join hands with the central government to promote the growth of electronics manufacturing in India.

Sanjeev Agarwal, chief manufacturing officer for Lava, echoed the same sentiment. “India can become an alternative to China if both the government and the industry work together to achieve this goal. Central and State governments have to come up with the right policies for the Industry. And once these right policies are in place, it should be the industry’s responsibility to put them into practice," he said.

“India doesn’t have international transshipment points," pointed out Kunkolienker, saying it's one of the reasons why exporting from here can be expensive. Transshipment points are ports where containers are offloaded from one ship to another.

In the short to medium term, India can present a viable alternative to China in the next 5 years. Kunkolienker and Agarwal both said it would take three to five years for India to ramp up production to the same levels where it can provide an alternative to China. However, Kunkolienker added that expecting 100% of components to be manufactured in India is unreal. “Where we are today is where China was 30 years ago," he said.

ABOUT THE AUTHOR

Prasid Banerjee

An engineering dropout, Prasid Banerjee has reported on technology in India for various publications. He reports on technology through text and audio, focusing on its core aspects, like consumer impact, policy and the future.
Catch all the Corporate news and Updates on Live Mint. Download The Mint News App to get Daily Market Updates & Live Business News.
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