The objective of the components incentive scheme is to develop a complete ecosystem of electronics manufacturing in India, officials aware of the details of the plan told ET. The move may further help attract global majors such as Apple to deepen local production, say experts.
“The scheme may offer incentives on production of components as well as capital support for setting up production facilities. The final contours of the scheme are still to be finalised, but we are aiming to come out (with the policy) by next financial year (starting April 1),” an official said on the condition of anonymity.
The government has already indicated that it would be open to joint venture (JV) partnerships with the Chinese firms for high-tech components, which will enable the likes of Apple to further expand manufacturing in India. The incentive scheme for components will aid companies located in geographies such as Taiwan, Korea and Japan to relocate or set up new units here.
The components incentive scheme becomes even more important, primarily because an existing scheme for the promotion of manufacturing of electronic components and semiconductors (SPECS) with an outlay of Rs 3,285 crore is coming to end by March 2023. SPECS was launched alongside the Rs41,000 crore production-linked incentive (PLI) scheme for smartphones in April 2020, for a period of three years.
SPECS was aimed at promoting manufacturing of high-value-added items such as electronics components and subassemblies such as camera modules, vibrator motors, display assemblies and touch panels. The scheme also provides incentives for the manufacturing of capital goods of the scheme-notified electronic items.
The plan has led to investments of around Rs 12,000 crore so far, as per details shared with ET by the Indian Cellular and Electronics Association (ICEA). The industry has been demanding that SPECS be extended for a further period of five years with a budgetary outlay of at least Rs 10,000 crore to support component manufacturing. According to the ICEA, given the massive dependency on China for finished products, especially IT hardware, it is impossible to create a relocation pathway to deepen global value chains in India without tier-2 and -3 manufacturers for finished products, subassemblies and components from India’s neighbour.The government is targeting electronics manufacturing worth $300 billion by 2026, of which $18 billion could be for components. The industry says it needs continuous support from the government because the disability of the Indian electronics system design and manufacturing sector as compared to other countries like Vietnam is still 10-14% on account of cost of finance, logistics and power, etc.
Officials said the government is aware that a successful ecosystem for electronics manufacturing can only be developed when the components are produced locally.
The intent of the government can be gauged from the fact that even the existing PLI schemes, like the one for IT hardware manufacturing, have a localisation schedule. To make it lucrative for component making firms, the government is open to giving selective approvals to Chinese firms also, if they are coming in with a joint venture with any Indian company.
Apart from China, the government wants to encourage joint ventures with firms from Taiwan, Japan, South Korea and Europe for high-tech electronics manufacturing.
The Centre, along with the industry, will soon start an exercise to identify potential Indian companies that can enter into electronics manufacturing through such ventures.
Rs 10,000-12,000 crore PLI sops soon for hi-tech IT, mobile components - Economic Times
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