PLI Scheme: Ball in electronics ministry#39;s court as appliance makers seek revision in base year

Home electronics in cardboard boxes isolated on white (Source: ShutterStock)

Home electronics in cardboard boxes isolated on white (Source: ShutterStock)

The Ministry of Electronics and Information Technology (MeitY) is considering a proposal that seeks a change in Production-Linked Incentive (PLI) scheme base year to FY21 from FY20.

Citing the Coronavirus outbreak, appliance makers had written to the MeitY seeking this revision.

“We understand that the companies have been facing challenges in meeting production criteria for FY21. We will review their request,” an official said.

On average, there has been a 30 percent contraction in sales in FY21 among white goods firms. This is on the back of the COVID-19 lockdown, production delays and movement restrictions due to lockdowns.

In November 2020, the Union Cabinet approved the PLI scheme for 10 sectors.

These are pharmaceuticals, automobiles and auto components, telecom and networking products, advanced chemistry cell battery, textile, food products, solar modules, white goods, and specialty steel.

Laptops and IT hardware were added to this list in February 2021.

However, under this scheme, the base year has been fixed at FY20. This means that there needs to be an incremental production of goods in FY21 and beyond to be eligible for financial incentives under the scheme.

Says the senior vice president-appliances at an electrical goods firm: “The first half of FY21 was a complete washout with lockdowns across the country. Now if FY20 is considered as the base year, we wouldn’t be able to show any incremental sales and the incentives go to waste.”

He added that there could be a series of meetings with the Electronics Ministry in July and August on this matter.

The PLI scheme for white goods became operational on April 1, 2021. Under this programme, eligible players in the air-conditioner and LED manufacturing space will be offered incentives worth Rs 6,238 crore over a period of five years.

Over and above this, the scheme for laptops and IT hardware has a total size approximately Rs 7,350 crore over four years.

This includes an incentive outlay of Rs 7,325 crore and administrative charges of Rs 25 crore.

It also incorporates cash incentives of 4-6 percent on incremental sales made over the base year of 2019-20, for five years. This means that companies will be eligible for incentives only if they exceed the production numbers of the base year.

If the base year is changed to FY21, the additional incremental sales made in FY22 would be higher and hence companies could reap benefits out of the scheme.

Points out Delhi-based analyst, Sudarshan Purohit, of CPG Consulting: “Global companies are reluctant to agree to be part of the PLI scheme. Extending the base year to FY21 could become a welcome change and nudge the electronics majors to set up production capacity in India.”

Moneycontrol had reported earlier how appliance makers are seeking additional incentives in the form of cheap land parcels to expand manufacturing facilities under the PLI scheme.