MeitY considering separate PLI scheme for electronics component manufacturing

The ministry of electronics and information technology (MeitY) is currently evaluating a proposal to introduce a separate production-linked incentive (PLI) scheme for electronics component manufacturing, sources familiar with the matter stated. The ministry is expected to discuss this proposal with the ministry of commerce and industry as well as NITI Aayog to explore the prospects and structure of the scheme.

The need for a separate PLI for local manufacturing of electronics components has emerged from multiple discussions between the government and the industry. Many players, including Dixon Technologies, have urged the government to establish a distinct PLI scheme for electronics components, separate from the scheme for the promotion of manufacturing of electronic components and semiconductors (SPECS), in order to make India self-reliant in the entire value chain of electronics ecosystem, government officials said.

Industry officials have pointed out that a separate PLI scheme would address the issue of the government’s ‘one size fits all’ approach. Under the current SPECS scheme, all capital goods, active and passive electronic components, such as resistors, capacitors, ferrites, diodes, as well as semiconductor wafers and integrated chips (ICs), are bundled together. The existing scheme offers a financial incentive of 25% of capital expenditure for the manufacturing of these goods.

Electronic components, especially passive ones, fall into different categories with varying financial requirements, magnitudes, sizes, valuations, employee requirements, and production techniques. Therefore, it is difficult to achieve the necessary scale under the present scheme, according to an executive at an electronics manufacturing company.While the IT ministry plans to discuss this matter with the commerce ministry, the latter is currently not enthusiastic about introducing additional PLI schemes, according to government officials. The decision regarding policy intervention for component manufacturing is crucial since the current Rs 3,285 crore SPECS scheme is only open until March 31, 2024. Another proposal to extend the outlay of the SPECS scheme to Rs 10,000 crore and extend the scheme by five years is also under consideration by the government.

The next steps involve the IT ministry, NITI Aayog, and industry stakeholders discussing the prospects of a new PLI scheme and establishing a framework to determine the kind of incentives that can be provided and the parameters for granting these incentives to companies planning to manufacture components in India.“No doubt that the government support is essential but we need to sit with the industry to understand what kind of policy tweaks are required in the present incentive framework,” another government official said. The official added that the government departments concerned will work on a concrete plan with the industry in terms of the value creation from the proposed electronic component scheme, before taking the proposal at higher levels.Among other concerns, the industry has also highlighted delays in receiving incentives under the SPECS scheme upon submitting applications.

Another industry executive suggested that a similar approach to what the government is doing in semiconductors could be applied to the electronics component sector to attract global players to begin manufacturing components here.The IT ministry has formed a nine-member task force with industry players to deliberate on electronic products and components that can be brought under domestic manufacturing, current issues related to hardware manufacturing, the need for policy intervention, and the timeline for resolving certain issues.

Industry representatives, including Ajai Chowdhry, founder of HCL; Sanjay Nayak of Tejas Networks; Vivek Tyagi, former chairperson of India Electronics and Semiconductor Association (IESA); Aman Gupta of boAt; and Sunil Vachani, chairman of Dixon Technologies, among others, are part of the committee.The government has set a target of achieving $300 billion in electronics manufacturing production by 2025-2026, from $102 billion in FY23. Financial Express