PLI Scheme: Samsung Selects FY21 as First Year to Avail 6% Incentives

Samsung, after becoming the only company to achieve production targets in smartphone PLI scheme, has selected FY20-21 as its first year to avail the 6% incentive.

Samsung Selects Last Fiscal as First Year for PLI Incentive

A person familiar with the matter said, "Samsung will take its incentives for the first year – FY20-21. It did all the hard work and met its targets".

However, this choice means that Samsung will have to double the targets set for other manufacturers, which is ₹4000 crore. That could prove challenging, given the COVID-19's second wave's effects, and an anticipated third wave.

An industry expert said, "Samsung had a quick ramp up last year because of its already installed capacity in their Noida factory and larger dependency on Korea rather than China for its supply chain, which is why they were able to achieve the targets while everyone else lagged behind". He added, "but in the current year when India was facing a destructive second wave, their factory was working on 50-60% capacity due to the disruptions as well as falling market demand. With another spurt of Covid infections predicted in the fourth quarter, producing an additional ₹8000 crore worth of goods may be challenging for the company," he added.

In the fiscal before, the company had notched up ₹70,628 crore in revenue. This represented over two-thirds of the total revenue of the mobile phone segment, as per figures reported by Tofler.

What do the Scheme Guidelines Say?

Samsung needs to make phones worth ₹8000 crore in the second year, over and above the base year; FY19-20 will become the base year in this case. The company has to make phones in the above $200 price category to avail the 6% second-year incentive.

Earlier this month, the government decided to extend the timeline for this PLI scheme by one year, and also accepted FY20-21 as zero year. This move was widely regarded as a big relief by the handset manufacturing industry. However, Samsung has chosen to stick to the original timeline to avail the crucial 6% incentive. The company had also become the only one to actually achieve production targets.

The PLI scheme, one of the largest of its kind with incentives worth ₹41,000 crore at stake, aims to make India an attractive manufacturing destination. The center has set an export target worth $100 billion for phones over the next 5 years.

The PLI scheme has set incremental production targets, and will hand out 6% incentive on achieving the said targets. For global companies, the PLI scheme has targets set at ₹4,000 crore, ₹8,000 crore, ₹15,000 crore, ₹25,000 crore and ₹50,000 crore in five successive years.