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Electronics manufacturers urge government to reconsider base year for PLI scheme

According to the industry, supply chain constraints and chip shortages worldwide have been making it difficult to meet targets required to qualify for benefits under the scheme.Premium
According to the industry, supply chain constraints and chip shortages worldwide have been making it difficult to meet targets required to qualify for benefits under the scheme.

  • The government will offer 4-6% cash incentives to companies on incremental sales made over the base year of 2019-20. Manufacturers are required to top the production numbers of the base year to avail the incentives

NEW DELHI: Electronics manufacturers have asked the Centre to shift the base year for its production linked incentive (PLI) scheme to 2020. The government has set 2019-20 as the base year, saying that PLI benefits will be offered on incremental sales over volumes produced in that year. According to the industry, supply chain constraints and chip shortages worldwide have been making it difficult to meet targets required to qualify for benefits under the scheme.

“During our review meeting of the PLI Scheme with the stakeholders, we are informed that except one, all other smartphone PLI applicants, in spite of their best efforts, are facing numerous challenges in fulfilling the qualification criteria of the scheme in FY 2020-21," the India Cellular and Electronics Association (ICEA), the apex industry body in the country, wrote in a letter to the Ministry of Electronics and Information Technology (MeitY), on March 24.

According to the scheme, the Indian government will offer 4-6% cash incentives to companies on incremental sales made over the base year of 2019-20. Manufacturers are required to surpass the production numbers of the base year to be eligible for incentives. As of now, that seems unlikely for most.

A global shortage of semiconductors is among the main reasons for this. Chip suppliers worldwide have struggled to keep up with demand post the pandemic. The ICEA’s letter said Chinese telecom giant Huawei had to procure two years’ worth of chips before September, thanks to sanctions placed on the company by the US government. The sanctions were effective from 30 September last year.

The letter also said the recovery from the pandemic hasn’t gone as predicted by various scientific models last year. Constraints placed in order to keep the pandemic in check have affected the manufacturers’ ability to reopen factories and hire talent. The industry has also been grappling in rising prices of ocean freight and more.

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