Cabinet nod not must to clear production-linked incentive scheme applications

Approval letters will be issued to all the 16 applicants selected for the production-linked incentive (PLI) scheme for mobile phone manufacturing as a Cabinet nod is not required for the same. Issuance of approval letters was delayed in the absence of Cabinet nod for the proposal sent by the Ministry of Electronics and IT (Meity). However, the Department of Expenditure (DoE) has clarified that there is no requirement for Cabinet approval.

“In terms of financial procedure and the facts of this case, the note for the Cabinet does not need to be submitted for consideration by the Cabinet, which has already approved the scheme after appraisal,” an office memorandum for DoE said.

According to the DoE, based on Rule 18 of Delegation of Financial Powers Rules (DFPR), where a project as a whole has been sanctioned after scrutiny and acceptance by the competent authorities, further concurrence of the same authorities shall not be required to sanction expenditure on the various constituent schemes included in the project, even if the magnitude of the expenditure involved in any such constituent scheme exceeds the financial threshold limit.

A meeting of the empowered committee took place on October 2 to amend the guidelines of the scheme and determine competent authorities for approval of eligible applicants for the PLI scheme. The committee includes Niti Aayog CEO Amitabh Kant, Meity secretary Ajay Prakash Sawhney, DEA secretary Tarun Bajaj, DGFT Amit Yadav, DPIIT secretary Guruprasad Mohapatra and Meity joint secretary Saurabh Gaur.

As many as 16 companies, including Foxconn, Samsung, Pegatron, Rising Star, Lava International etc. have been selected for the scheme.

The objective is to promote five global and five local champions, and also firms in component manufacturing. The subsidy outlay for five global firms (invoice value of Rs 15,000 and above) is Rs 28,150 crore, approximately Rs 5,630 crore per company over five years. For local firms, the total incentive outlay is Rs 7,300 crore, which is around Rs 1,460 crore per company over five years.

For electronic components, six eligible applicants will be given Rs 900 crore as incentive. The Meity had earlier sent the note to Cabinet for approval of the selected applicants.

Over the next five years, the scheme is expected to lead to a total production of about Rs 11.5 lakh crore.

The scheme is expected to promote exports significantly. Of the total production of Rs 11.5 lakh crore, more than 60% will be contributed by exports of the order of Rs 7 lakh crore. The scheme will bring additional investment in electronics manufacturing to the tune of Rs 11,000 crore.

The scheme will generate approximately 3 lakh direct employment opportunities in next five years along with creation of additional indirect employment of nearly three times the direct employment. Domestic value addition is expected to grow from the current 15-20% to 35-40% in case of mobile phones and 45-50% for electronic components.

The scheme will provide an incentive of 4 to 6% on incremental sales, over the base year of goods manufactured in India and covered under target segments, to eligible companies for a period of five years subsequent to the base year as defined.

The production of mobile phone handsets in 2018-19 has reached 29 crore units worth Rs 1.70 lakh crore from 6 crore units worth Rs 19,000 crore in 2014. While the exports of electronics have increased from Rs 38,263 crore in 2014-15 to Rs 61,908 crore in 2018-19, India’s share in global electronics production has reached 3% in 2018 from 1.3% in 2012.