The Ministry of Electronics & Information Technology today launched three schemes to encourage domestic manufacturing. These are the Production Linked Incentive Scheme (PLI) for Large Scale Electronics Manufacturing, the Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS) and the Modified Electronics Manufacturing Clusters (EMC 2.0) Scheme. The schemes have an outlay of Rs 50,000 crores (~$6.65 billion).
The Manufacturers’ Association for Information Technology welcomed the scheme; “MAIT is delighted on the introduction of this policy, the formulation of which was deliberated aggressively with the stakeholders,” the association’s president Nitin Kunkolienker said in a statement. “The mobile manufacturing industry is very positive about the move and this scheme will help meet the targets under the National Policy on Electronics, 2019. This will certainly lead to companies moving their supply chains to India. To increase the job creation, component manufacturing needs to be moved too.”
Based on incremental sales from the financial year 2019–20, the PLI scheme will provide a 4–6% incentive on “electronic components and semiconductor packaging”, with the percentage gradually decreasing over the coming years. PLI takes the lion share of the financial outlay, budgeted at Rs 40,951 crore over five years. The incentives per company, which will start being applicable on August 1, will be subject to ceilings. Cumulative minimums will also apply, meaning that companies will have to start investing soon, and invest consistently over the coming years, to be eligible for incentives.
An Empowered Committee will consider applications, comprising the CEO of NITI Aayog, the Secretary of Economic Affairs, the Secretary of Expenditure, the Secretary of MEITY, the Secretary of Revenue, and the Secretary of DPIIT and the Directorate General of Foreign Trade. The committee will be empowered to modify the incentive in the coming five years.
MEITY will issue guidelines for the scheme after consultations with other ministries and departments. PTI reported that the Department of Telecommunications will be holding an online meeting with global telecom equipment manufacturers on June 3. It’s worth noting that while this scheme provides a 6% incentive, the government also increased GST on mobile phones by 6 percentage points from 12% to 18%, with effect from this April.
The Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS) will have a budget of Rs 3,285 crore over five years. This scheme will provide a 25% incentive for capital expenditure on electronics manufacturing. MEITY says that spending on “Plant, Machinery, Equipment, Associated Utilities and Technology including R&D” will be eligible for the incentive. “The scheme shall be applicable for investments in new units as well as expansion of capacity / modernization and / or diversification of existing units,” the ministry said. The allowed incentive for some types of spending, such as Transfer of Technology and utilities, are capped at a percentage of overall incentive sought.
This scheme will also provide incentives over five years. MEITY will appoint a Project Management Agency to review applications, after which executive and governing councils will oversee the implementation.
The Modified Electronics Manufacturing Clusters Scheme (EMC 2.0) will run for a period of eight years, until 2028. For the first four years, Software Technology Parks of India, an autonomous society set up by MEITY, will be the Project Management Agency. This scheme has an outlay of Rs. 3,762 crore. MEITY says this scheme’s objectives are to “Create a comprehensive supply chain / ecosystem for strengthening electronics manufacturing base; attract Anchor Units to set up production along with their supply chain; [develop] World class Plug and Play infrastructure along with Standard Factory Sheds; Establish Common Facility Centres (CFC); [and] Reduce the infrastructure & logistics cost.”
This scheme provides for an incentive of 50% of project cost, with up to Rs. 70 crore for every 100 acres of land. The overall incentive per project will be capped at Rs 350 crore (which means that at best, a couple dozen reasonably sized projects will receive incentives). Common Facility Centres will receive a 75% incentive up to Rs 75 crore per project.