By Rupin Chopra and Apalka Bareja
The Indian Daily, Economic Times has reported that the Contract manufacturer for Apple Inc., Pegatron is all set to establish manufacturing unit in India with a target of producing goods worth more than INR 8,000 crore in the next fiscal year starting April, 2022[1].
Last year two other manufacturers which started the manufacturing of iPhones were Foxconn and Wistron, these manufacturer are Taiwan based. The manufacturers were selected under the PLI (Production- linked Incentive) Scheme.
Also read PLI Scheme for IT Hardware
Production Linked Incentive (PLI) Scheme
PLI is a conventional and popular strategy used by the Government to boost the production of goods considered necessary for job creation, social welfare and taxation. PLIs are essentially financial incentives for businesses to augment their output. They could come in the form of tax rebates, lowered import and export duties or easier land acquisition norms. The scheme was first introduced in March 2020 and then in 2021-2022 in the budget speech of Finance Minister, Ms. Nirmala Sitharaman, pursuant to which an outlay of INR 1.97 lakh crore for the PLI scheme was set-up. The scheme is aimed at boosting domestic manufacturing under the Atmanirbhar Bharat initiative of the Government of India.
The government notified PLI schemes for smartphones in April, 2020 and specific companies were selected to start operations from August, 2020. In the wake of COVID-19 pandemic and subsequent impact on businesses, the Government further extended the duration of the PLI Scheme from five year period to six years, in which companies were given the option to select five years within this span.
Apple’s cycle under the Scheme started from August, 2021. Pegatron will also be availing the benefits under the PLI scheme and are likely to avail the first-year benefits by the end of March,2022. In order to become eligible for the incentives for the second year, Pegatron has to invest INR 250 Crore with INR. 8000 Crore of goods produce in second year followed by INR 15000 Crore, INR 20,000 Crore and INR 25,000 Crore of production in the following three consecutive years, under the five-year programme. Once Pegatron is able to meet the targets, the government will pay 6% of the cost of production as incentive in the second year, 5% in the third and fourth year, and 4% in the fifth year. However, the same is limited to INR 40,995 Crore.
Challenges- PLI Scheme India
It was communicated by the Communication and IT Minister Mr. Ashwini Vaishnaw in January, 2022, that the main issues pertaining to PLI Scheme were related to labour, housing and industrial zone issues. Industries sought a housing/dormitory policy for the industrial units, since campus housing as desired by the industry is not permitted under the current laws. The Minister in this context also remarked that “I discussed the issue of setting up manufacturing units, with a footprint of over 40,000 and up till 1 lakh, with the labour minister (Bhupendra Yadav).[2]
Conclusion
Apple is one of the fastest growing brands in India with shipments growing 108% on-year to a record of 5 million units, or a roughly 4% market share[3], driven by factors like, wider local manufacturing backed by aggressive marketing to tap into strong demand. As per Market Trackers, it is expected that 2022 will be an even stronger year for the company, on the back of a larger manufacturing presence coupled with the recent launch of the iPhone SE 2022 and its broadest iPhone portfolio across price tiers.
Vidhi Oberoi, Associate at SSRANA has assisted in research of this article.
[1] https://economictimes.indiatimes.com/industry/telecom/telecom-news/pegatron-to-start-india-manufacturing-from-april-aims-for-over-rs-8000-cr-production-in-fy23/articleshow/90234819.cms?from=mdr
[2] https://economictimes.indiatimes.com/industry/cons-products/electronics/changes-in-labour-rules-pli-on-cards-for-electronics-push/articleshow/89103714.cms
[3] https://www.businesstoday.in/latest/corporate/story/exclusive-apple-likely-to-garner-55-market-share-in-india-in-2022-321304-2022-02-03#:~:text=While%20Apple%20closed%20CY%202021,market%20share%20in%20CY%202022.
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