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Go home China! India announces its first list of manufacturers under the PLI scheme

The Government on Tuesday announced its first list of eligible smartphone manufacturer who will come under the new Product Linked Incentive (PLI) scheme. There were 16 applicants who were found eligible to be on the list of the product linked incentive scheme for large scale electronics manufacturing launched in April this year, including Samsung, Lava, Micromax, Dixon and contract manufacturers for Apple iPhone – Foxconn, Wistron and Pegatron.

Now you may be wondering about the title that why it is written Go home China! and most of you may have been drawn to this topic due to this part. It is simply written because in this list there is no Chinese manufacturer chosen. Yes, you have read it right. Chinese smartphone manufacturers like Xiaomi, Vivo, Oppo, OnePlus or Realme have been totally left out of this list though they are said to control 70% of the Indian smartphone market. So, now many of you who do not know about the government’s Product Linked Incentive (PLI) scheme may be wondering about how this is going to impact or benefit the manufacturing industry and how it can be a set back for Chinese manufacturers who have not been listed eligible under this scheme. So, let us have a look at this PLI scheme in the next paragraph.

What is the PLI scheme?

The Product Linked Incentive scheme or the PLI scheme was declared on April 1 by the IT ministry of the Indian government. The PLI is a part of the National Policy of Electronics. It is supposed to provide an incentive in the range of 4-6 per cent to electronics companies which manufacture mobile phones and other electronic components such as transistors, diodes, thyristors, resistors, capacitors and nano-electronic components such as micro-electromechanical systems.

As per the scheme, manufacturers of mobile phones who sell their phones for Rs. 15,000 or more will get a 6% incentive respective to their incremental sales performance made in India. In the same category, companies which are owned by Indian nationals and make such mobile phones, the incentive has been kept at Rs 200 crore for the next four years. The eligible manufacturers can also seek incentives for either creating a new unit or seek incentives for their existing units from one or more locations in India.

The PLI scheme will be active for 5 years and the financial year (FY) of 2019-20 will be considered as the base year for calculation of incentives which means that all investments and incremental sales registered after FY20 shall be taken into account while computing the incentive to be given to each company.

For the first year, the total incentive to be given has been capped at Rs 5,334 crore, while for the second and third year it has been kept at Rs 8,064 and Rs 8,425 crore, respectively. In the fourth year, the incentive will be hiked substantially to Rs 11,488 crore, while in the fifth and final year, the incentive to be distributed has been capped at Rs 7,640 crore. The total incentives over five years has thus been kept at Rs 40,951 crore.

It is also mentioned in the scheme that any additional expenditure incurred by the companies on the plant, machinery, equipment, research and development and transfer of technology for the manufacture of mobile phones and related electronic items will be eligible for this incentive scheme. However, all investments done on land and building will not be covered by this scheme.

According to government officials, the scheme’s main focus is on to bring or pull in big foreign investors and on the other hand to encourage the growth or expansion of Indian manufacturers in India. It is also estimated by experts that the companies approved under the scheme will generate more than two lakh direct employment opportunities in next 5 years along with the creation of additional indirect employment of nearly 3 times the direct employment.

So, from the above explanation, you can already understand the alternative agenda of the government is to take back the smartphone market from the Chinese manufacturers by introducing new foreign investors and by encouraging Indian manufacturers.

Why does the government want the Chinese out and why now of all times?

These Chinese manufacturers are making it difficult for Indian manufacturers to grow in these tough times. The Chinese are capturing the Indian market by selling products at really cheap rates which are not possible for the Indian competitors. The rate at which the Chinese manufacturers are expanding in India and are crushing their Indian counterparts are alarming. So, the government is interfering with the market to stop them from creating an oligopoly market.

On the other hand, there is a continuous border dispute going on with China and recently the Galwan valley issue caused a bigger turmoil on a national basis in India. This issue has created an anti-Chinese atmosphere in the hearts of the Indian public for which the public has raised a cry to ban all kinds of Chinese goods in India which is having a huge catalytic role in this.

Also due to the pandemic, many manufacturers are planning to leave China as China is considered the point of origin for the Covid-19 virus which is considered very bad for business as the world is blaming China for this monstrous pandemic which is taking uncountable lives daily and that is why no manufacturer wants to associate their names with China. So, this is a golden opportunity for India to rope in these companies who are panicking to leave China fast and are looking for cheap alternatives.

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