India launched a $6.65 billion (~Rs 50,000 crore) plan on Tuesday to boost electronics manufacturing, saying it would start by offering five global smartphone makers incentives to establish or expand domestic production. The government is offering a production-linked incentive (PLI) involving cash worth 4-6 percent of additional sales of goods made locally over five years, with 2019-2020 as the base year, technology minister Ravi Shankar Prasad told a news conference.
This aligns with an earlier report, which stated that an empowered committee had decided to not devalue production plant and machinery brought to India for make in India purposes. The earlier report stated:
To be involved in the decision-making process, companies will need to have invested and set up some scale of manufacturing processes in India already. To further ease the rules and make local manufacturing of smartphones in India seem attractive, the committee has chosen to remove certain valuation caps from the production process, and also de-link the payout of the local manufacturing incentive from the government’s financial condition. In other words, companies manufacturing in India will have an assurance of earning its PLI, therefore making India seem like a viable alternate manufacturing destination after China.
Names of the five companies, which would have to meet investment and sales thresholds to be eligible, were expected to be announced in the next two months, ministry officials said. Five Indian firms would also be selected for the PLI scheme, which, along with two other related initiatives, could help India produce smartphones and components worth 10 trillion rupees ($133 billion) by 2025, Prasad said. The smartphone industry has become a showpiece for Prime Minister Narendra Modi’s ‘Make In India’ drive. The Government now wants to make the country an export hub.
Global players such as Samsung and Taiwanese firms Foxconn and Wistron, which both supply Apple, have already ramped up local production, attracted by India’s huge market of 1.3 billion people. The new plan also includes schemes to drive up production of components and create manufacturing clusters with pre-built factory sheds and common facilities for companies to move in immediately. “We want the bridegrooms to come but we also want the entire wedding procession. A company coming (to India) should also bring the entire procession of its ancillaries,” Prasad said.
The plan comes as more companies look for manufacturing sites outside China, where the Coronavirus Pandemic disrupted global supply chains. India, which offers cheap labour, has more than 1 billion mobile connections but less than half that number of Smartphones, offering manufacturers a huge potential market.