DVA To Be Key In Smartphone PLI 2.0 To Achieve $300 Billion Electronics Production Target By 2030

Doubling down on its efforts to raise domestic value addition in electronics manufacturing to 40%, the central government is likely to link subsidy payouts in the second phase of the Production Linked Incentive (PLI) scheme to the level of local value addition.

Local value addition has risen to around 20% from about 15% in 2020, according to a report by Business Standard. While launching the Smartphone PLI 1.0 in 2020, the government had expected value addition to reach the range of 35–40% towards the end of the scheme in 2026.

As expectations have not been met, the government is planning to make local value addition a key metric to disburse incentives in the second phase of the scheme, according to the Business Standard report.

Under the current scheme, which is set to end on March 31 this year, incentives are handed out based on the achievement of yearly targets of incremental investment and incremental production by companies.

While the government also tracks exports and employment generation under the PLI scheme, these parameters were not linked to incentives for eligible companies.

The continuation of the PLI scheme for smartphones shows the importance of the scheme in achieving the government’s target of $500 billion worth of electronics manufacturing by 2030.

The decision to continue the scheme overrides the view in policy circles that such incentives should be given only once and not repeated. According to another report by The Economic Times, the government does not want to give away gains in the electronics manufacturing sector in the face of Chinese competition.

Against China, India still faces an 11–14% cost disability, which the PLI scheme eased. It provided 4–6% financial incentives to eligible companies.

The move to continue the scheme would also provide relief to companies like Apple, Samsung and Dixon Technologies, as they have made significant investments after the launch of the scheme.

After the Smartphone PLI scheme, India’s smartphone exports reached over $30 billion, with Apple having a 76% share.