Moneycontrol PRO
you are here: HomeNewsTechnology

Explained | What is production linked incentive scheme?

This scheme will be implemented through a Nodal Agency which will act as a Project Management Agency (PMA). It will provide secretarial, managerial, and implementation support, as well as carry out any other responsibilities assigned to them by the Ministry of Electronics and Information Technology (MeitY)

August 01, 2020 / 08:40 PM IST

Government’s performance-linked incentive (PLI) scheme for the mobile phone sector has “given us hope and secured a favourable response,” Union Minister for Information Technology and Communications Ravi Shankar Prasad, said on August 1.

So far, a total of 22 companies have registered for the PLI scheme. These include global companies like Samsung, Foxconn Hon Hai, Rising Star, Wistron, and Pegatron.

Similarly, it also includes Indian companies like Lava, Dixon Technologies, Bhagwati (Micromax), Padget Electronics, Sojo Manufacturing Services, and Optiemus Electronics.

"Besides this, we have received commitments to make mobile phone and parts worth Rs 11.5 lakh crore,” Prasad added.

Also Read: Samsung, Foxconn apply for PLI; commitments worth Rs 11.5 lakh crore made, says Ravi Shankar Prasad

Here is all you need to know about PLI, its implementation, and how the incentives work.

What is PLI scheme?

The PLI scheme was notified on April 1 in accordance with the National Policy on Electronics. According to the scheme, incentives of 4-6 percent will be given to electronics companies that manufacture mobile phones and other electronic components such as transistors, diodes, thyristors, resistors, capacitors, and nano-electronic components such as microelectromechanical systems.

Who oversees the implementation?
This scheme will be implemented through a Nodal Agency which will act as a  Project Management Agency (PMA). It will provide secretarial, managerial, and implementation support, as well as carry out any other responsibilities assigned to it by the Ministry of Electronics and Information Technology (MeitY).

Who can apply for the scheme? 

All electronic manufacturing companies which are Indian or have a registered unit in India will be eligible to apply for the scheme. These companies can either create a new unit or seek incentives for existing units in one or more locations in India.

What's in it for mobile phone manufacturers?

Global companies that manufacture phones in India which sell for Rs 15,000 or more will be given an incentive of up to 6 percent. This is on incremental sales of these of all such phones in India.

Whereas, companies that are owned by Indian nationals and manufacture the same category of phones, have the incentive set at Rs 200 crore for the next four years.

What is the tenure of the scheme? 

The PLI scheme will be active for five years. It will take FY 2019-20 as the base year for calculation of incentives.

How are the incentives calculated and distributed?

The total incentives over five years have been kept at Rs 40,951 crore.

Total incentive available to distribute for the first year is capped at Rs 5,334 crore. For the second-year Rs 8,064 have been earmarked, and for the third year incentives are capped at 8,425 crore. This will is hiked for the fourth year to Rs 11,488 crore. In the fifth and final year, 7,640 crore is the amount that will be distributed.

What counts for incentives, and what doesn't?
All investment done by companies on land and buildings for the project will not be considered for any incentives or determine the eligibility of the scheme.

But, additional expenditure incurred by companies on the plant, machinery, equipment, research, and development and transfer of technology for the manufacture of mobile phones, including related electronic items will be eligible for the incentive scheme.

Invite your friends and family to sign up for MC Tech 3, our daily newsletter that breaks down the biggest tech and startup stories of the day

Moneycontrol News
first published: Aug 1, 2020 05:07 pm