Govt fillip to electronics manufacturing

The Union Cabinet has cleared three schemes involving a total incentive of around Rs 48,000 crore to boost electronics manufacturing in the country, Telecom and IT Minister Ravi Shankar Prasad said on March 21.

The government is expecting to generate manufacturing revenue potential of Rs 10 lakh crore and create direct and indirect jobs for 20 lakh people by 2025 through these schemes, he said.

Electronic manufacturing companies will get an incentive of 4 to 6 per cent on incremental sales (over base year) of goods manufactured in India and covered under target segments, to eligible companies over a period of next 5 years.

The Cabinet approved another scheme for promotion of manufacturing of electronics components and semiconductors with a budget outlay of Rs 3,285 crore spread over a period of 8 years. 

It also approved revised version for electronics manufacturing clusters with a total incentive outlay of Rs 3,762.25 crore spread over a period of 8 years with an objective to create 10 lakh direct and indirect jobs under the scheme. 

“If India has to progress in the field of electronics then it should also become a centre for component manufacturing for electronics, telecommunications, consumer electronic, medical electronics, strategic electronics etc. This is investment in the downstream value chain. We will give 25 per cent incentive on capital expenditure,” Prasad said.

A look at the three schemes.

1. Large scale electronics manufacturing

The Union Cabinet approved the Production Linked Incentive (PLI) scheme for large scale electronics manufacturing. The scheme proposes production linked incentive to boost domestic manufacturing and attract large investments in mobile phone manufacturing and specified electronic components including Assembly, Testing, Marking and Packaging (ATMP) units.

The PLI scheme shall extend an incentive of 4 per cent to 6 per cent on incremental sales (over 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 proposed scheme is likely to benefit 5-6 major global players and few domestic champions, in the field of mobile manufacturing and specified electronic components and bring in large scale electronics manufacturing in India.

The total cost of the proposed scheme is Rs 40,995 crore.

Significance of the scheme

The production value of mobile phones in the country has gone up significantly from around 18,900 crore in 2014-15 to 1,70,000 crore in 2018-19 and the domestic demand is almost completely being met out of domestic production.

By integrating ‘Assemble in India for the world’ into ‘Make in India’, the country can significantly increase manufacturing output.

Electronic components are the basic building blocks for electronics manufacturing. According to the Electronic Industries Association of India (ELCINA), the electronic components market in India has increased from Rs 68,342 crore in 2015-16 to Rs 1,31,832 crore in 2018-19. 

Benefits of the scheme

*The scheme has a direct employment generation potential of over 2 lakh jobs over five years. 

*It is expected that the scheme would lead to large scale electronics manufacturing in the country and open tremendous employment opportunities. Indirect employment will be about three times of direct employment as per industry estimates. 

*Industry body India Cellular and Electronics Association said that the PLI scheme is of global scale which not only spur manufacturing but more importantly exports of mobile handsets at a global scale. 

2. Electronics Manufacturing Clusters

The Cabinet has approved financial assistance to the Modified Electronics Manufacturing Clusters (EMC 2.0) scheme for development of world class infrastructure along with common facilities and amenities through Electronics Manufacturing Clusters (EMCs).

The total outlay of the propose EMC 2.0 scheme is Rs 3,762.25 crore  

The scheme will create a robust infrastructure base for the electronic industry to attract flow of investment in Electronics System Design and Manufacturing (ESDM) sector and lead to greater employment opportunities.

Significance of the scheme

India’s share in global electronics manufacturing grew from 1.3 per cent in 2012 to 3 per cent in 2018. It accounts for 2.3 per cent of India’s GDP at present.

To build and create a requisite infrastructure ecosystem for electronics manufacturing, Ministry of Electronics and Information Technology (MeitY) notified Electronics Manufacturing Clusters (EMC) scheme which was open for receipt of applications upto October, 2017. 

A period of five years is available for disbursement of funds for the approved projects.

Under the scheme, 20 Greenfield EMCs and 3 Common Facility Centres (CFCs) measuring an area of 3,565 acres with project cost of Rs 3,898 crore including government aid of Rs 1,577 crore have been approved in 15 states across the country.

There is a need for continuation of such scheme in modified form for further strengthening the infrastructure base for the electronics industry in the country and deepening the electronics value chain.

The EMC 2.0 scheme would support setting up of both EMCs and CFCs. 

It is expected that EMCs would aid the growth of the Electronics System Design and Manufacturing (ESDM) sector, help development of entrepreneurial ecosystem, drive innovation and catalyze the economic growth of the region by attracting investments in the sector, increasing employment opportunities and tax revenues.

For the purpose of this scheme, an EMC would be set up in geographical areas of certain minimum extent, preferably contiguous, where the focus is on development of basic infrastructure, amenities and other common facilities for the ESDM units.  

3. SPECS gets approval

The Union Cabinet has approved to offer a financial incentive of 25 per cent of capital expenditure for the manufacturing of goods that constitute the supply chain of an electronic product under the Scheme for Promotion of manufacturing of Electronic Components and Semiconductors (SPECS).         

The scheme will help offset the disability for domestic manufacturing of electronic components and semiconductors in order to strengthen the electronic manufacturing ecosystem in the country.

The total cost of the scheme is Rs 3,285 crore. 

Significance of the scheme

The vision of National Policy on Electronics 2019 (NPE 2019) notified on February 2, 2019 is to position India as a global hub for Electronics System Design and Manufacturing (ESDM) by encouraging and driving capabilities in the country for developing core components, including, chipsets, and creating an enabling environment for the industry to compete globally.

A vibrant electronic components manufacturing ecosystem is vital for the overall long-term and sustainable growth of electronics manufacturing in India and essential to achieve net positive Balance of Payments (BoP).

It is therefore proposed to provide an incentive of 25 per cent on capital expenditure on plant, machinery, equipment, associated utilities and technology, including for Research & Development to the industrial units making investment for manufacturing of electronic components, semiconductors, ATMP, specialized sub-assemblies and capital goods for these items, in the specified categories.

This will cater to all segments of electronics manufacturing such as mobile electronics, consumer electronics, industrial electronics, automotive electronics, medical electronics, strategic electronics, power electronics, telecom equipments, computer hardwares, etc.

Benefits of the scheme

*The proposal when implemented will lead to the development of electronic components manufacturing ecosystem in the country. 

*It will lead to new investments in the electronics sector to the tune of at least Rs 20,000 crore.

*Direct employment of approximately 1.5 lakh is expected to be created in the manufacturing units supported under the scheme, including indirect employment of about three times of direct employment as per industry estimates. 

*Reducing dependence on import of components by large scale domestic manufacturing that will also enhance the digital security of the nation.

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