The government has started talks with smartphone makers for another round of incentive scheme with the current production linked incentive (PLI) scheme ending next month.
The government is likely to create an exception for the smartphone industry in offering another round of incentives even as the general view remains that sops should be offered once as part of a PLI scheme and the same should not be extended when the scheme gets over, officials told ET.
“We are open-minded on this. We are examining the need and circumstances that are changing,” said an official on condition of anonymity.
He said the situation is dynamic, so the general principle may not be applicable for industry-specific issues.
Live EventsRecently, the fentanyl tariffs on China have become zero, taking away the leverage from the Indian players.
Also, while the disability in terms of manufacturing costs vis-à-vis China has reduced it still remains at 11-14%, making it difficult for the industry to compete in the absence of incentives.
However, with the US Supreme Court scrapping sweeping global tariffs last week, India has lost its competitive advantage vis-à-vis China.
Also, while the disability in terms of manufacturing costs vis-à-vis China has reduced from 18-19% four to five years ago, it is still in the range of 11-14%, making it difficult for the Indian industry to compete in the absence of incentives.
A second official said the government has held informal talks with several smartphone makers including Foxconn, Tata, Apple, Samsung, Bhagwati (Micromax), Dixon and Lava.
“We are in talks with the industry and we will respond to their needs,” the official said.
Queries sent to these companies remained unanswered.
Once the Centre finalises the need for a fresh incentive scheme for the smartphone industry, it would decide upon other aspects such as total outlay and level of sops to be offered.
The government would also need to make provision for the PLI scheme in the next fiscal year budget as incentives are usually given after completion of targets in a particular year. The new scheme would, however, have to commence from April due to expiry of the current programme on March 31.
Points to Ponder
Officials cited three core factors behind making the potential exception for the smartphone industry. First, the government doesn’t want to stop or derail an industry which is doing great. Second, with fentanyl tariffs becoming zero for China, bringing it on par with India, it has reduced the competitiveness of companies in India, impacting thousands of crores in investments.
This could hurt the competitiveness of Indian industry as China has well-developed supply chains and advanced manufacturing while the former is in the process of developing these capabilities, necessitating government support. Sustaining incentives at this juncture has become all the more crucial as smartphones emerged as India’s top exports category for the first time, dislodging automotive diesel fuel, clocking a total $30.13 billion in 2025, with Apple accounting for 76% of the total. The US remains the top destination for India’s smartphone exports.