Government : Apple to Increase Domestic Production in India
Government has paved the way for Apple, others to increase domestic production by removing a clause.
The government has dropped contentious clauses, which include the evaluation of plant and machinery to be brought from South Korea and China. It had been opposed mainly by Apple, paving the way for the iPhone maker and others like Samsung, Foxconn, Oppo, Vivo, and Flextronics to make a more extensive play in local production using the production-linked incentive scheme.
On Friday, the empowered committee of secretaries met and decided to remove the clause, which evaluated plant and machinery brought into India at 40% of its value. It has agreed to a few other changes so that manufacturing could shift to India in a big way.
The irritants have been resolved. Through the scheme, India is trying to attract American investment with pressure on US companies now to diversify manufacturing out of China under the ‘China plus one strategy’.
Among the changes agreed to were to include the industry in discussions before making changes to the PLI scheme. These will be done once companies have invested and started producing in the country. Earlier, a clause permitted the empowered committee to be able to change the rules unilaterally, but investors had voiced concerns with this clause.
These changes made include removal of various caps, including another clause which said the government would release the incentive despite the industry meeting its targets only if it had the money to do so. Instead, a requirement on force majeure, which permits the companies to seek relief from the objectives in time of natural calamities. Like, Covid-19, has been added
The government wishes to attract large-scale smartphone manufacturing to India. It will raise exports out of India to over $100 billion by 2025 from under $3 billion now.
The proposed investors raised concerns on the excessive had business information sought by the government, which has been further helped.
Depending upon the production aims achieved by the companies in the coming years, and the government could alter the benefits depending upon the performance of companies.
To avail the graded incentives ranging 4% and 6% over five years, foreign manufacturers will have to produce high-end phones with freight on board value of more than $200, which is more than Rs 4,000 crore over and above the production level in the base year.
In consecutive years, manufacturing units will have to produce phones worth Rs 8,000 crore, Rs 15,000 crore, Rs 20,000 crore and Rs 25,000 crore respectively over the base year production value, if they wish to avail the incentives.
The scheme, which is, most probably to be notified next week, will send incentives to both foreign as well as domestic manufacturers over five years. While the eligibility for foreign investors and local investors varies, a total of Rs 40,951 crore has been earmarked as incentives for companies, which achieve the production and minimum incentive targets.