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The electronics sector welcomed the government’s decision to extend the tenure of its production linked incentive (PLI) scheme by one year today. Multiple industry bodies had asked for the reform in March, after pandemic driven supply shortages and other supply chain constraints led to companies failing to meet the targets set in the scheme.

“This extension will not only support the Government’s efforts to establish India as an integral part of the Global Value Chain (GVC) in the electronics sector, it will also support developing Indian Champion companies to tap the Global as well as Indian markets through this sharply targeted production incentivization scheme," said Pankaj Mohindroo, Chairman of the ICEA.

According to George Paul, chief executive officer (CEO) of the Manufacturers Association of Information Technology (MAIT), the move will help both companies who had been able to meet the target last year and those who couldn’t. “Our competitors are competing nations and we have to be more agile than them to attract manufacturing into India," he said.

The electronics industry was plagued by supply shortages from the semiconductor sector last year, an issue that continues this year. It was also hamstrung by a massive rise in freight prices and issues in sourcing components due to travel restrictions enforced by various nations due to the pandemic, companies had claimed earlier. In a letter to the government in March, the India Cellular and Electronics Association (ICEA), said 15 out of 16 PLI applicants may not be able to fulfil the target.

“Most of them were struggling to achieve their targets," said Tarun Pathak, Counterpoint. “The PLI scheme already got a great mindshare, and they wouldn’t want to dilute that. If only one or two brands had achieved their targets for two years in a row, it would have sent a very poor signal to the rest of the industry," he added.

The PLI scheme is amongst the major steps by the Government of India to drive scale in electronics manufacturing in India. Finance Minister Nirmala Sitharaman announced an extension for the scheme in a speech today. The scheme provides 4-6% cash incentives to manufacturers for incremental sales of goods for a period of five years. While the base year for this was set to 2019-20 earlier, lasting till 2020-25, it has now been extended to 2025-26 now.

Investments made in 2020-21 will also be counted. “Participating companies will get the option of choosing any five years for meeting their production targets under the scheme," the government said.

“The challenges in the previous year were setting up the manufacturing capacity here and availability of components. Now that air travel has started and movement of goods has become smoother, that has become easier, though it isn’t the way it was earlier," said Paul. “At least for the big global players, their planning is done well in advance, so I think we’ll get a better view about where we stand after about three months as to where we stand with respect to this year," he added.

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