Connect with us

CT Stories

Strengthening the electronics manufacturing ecosystem

The government has sanctioned an outlay of Rs 50,000 crore for the three schemes it had announced on April 1, 2020, Production Linked Incentive Scheme (PLI) for large scale electronics manufacturing; Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS); and Modified Electronics Manufacturing Clusters (EMC 2.0) Scheme.

The three schemes together will enable large-scale electronics manufacturing, domestic supply chain of components and state-of-the-art infrastructure, and common facilities for large anchor units and their supply chain partners. These schemes shall contribute significantly to achieving a USD 1-trillion digital economy and a USD 5-trillion GDP by 2025. Applications have been invited, the last date for submission being July 31.

This includes the telecom equipment manufacturers, Nokia, Ericsson, Samsung and Huawei that are making telecom equipment in India but the local content addition is around 40 percent. The government wants it to increase it to 100 percent. However, Indian players are sourcing some of the components from abroad, so even they are not 100 percent indigenous.

Under the scheme, companies could make specified telecom products in India. These include 5G next generation radio access network equipment and associated systems, 5G base station and core equipment, switches, routers, optic fibre cables and digital microwave radios, among others.

Backgrounder

Promotion of electronics manufacturing has been a key component of Make in India program. With efforts such as the National Policy on Electronics, 2019, Modified Special Incentive Scheme (MSIPS), Electronics Manufacturing Clusters and Electronics Development Fund etc., India’s production of electronics grew from USD 29 billion in 2014 to USD 70 billion in 2019. The growth in mobile phone manufacturing in particular has been remarkable during this period. From just 2 mobile phone factories in 2014, India now has become the second largest mobile phone producer in the world.  Production of mobile handsets in 2018-19 has reached 29 crore units worth Rs 1.70 lakh crore from just 6 crore units worth Rs 19,000 crore in 2014. While the exports of electronics has increased from Rs 38,263 crore in 2014-15 to Rs 61,908 crore in 2018-19, India’s share in global electronics production has reached 3 percent in 2018 from just 1.3 percent in 2012.

Prime Minister Narendra Modi has given a clarion call for Aatma Nirbhar Bharat – a self-reliant India.  Ravi Shankar Prasad has often elaborated that this does not mean India in isolation but India as a major country of the world with appropriate technology, capital including FDI and extraordinary human resource contributing significantly to the global economy. India may need to revisit free trade agreements (FTAs) with several countries, as they continue to hamper the country’s plan to emerge as a manufacturing powerhouse for electronics, said the minister.

With a view to building a robust manufacturing ecosystem which will be an asset to the global economy we are looking forward to developing a strong ecosystem across the value chain and integrating it with global value chains. This is the essence of these three schemes.

The PLI Scheme shall extend an incentive of 4 percent to 6 percent on incremental sales (over base year) of goods manufactured in India and covered under the target segments, to eligible companies, for a period of five years subsequent to the base year. The SPECS shall provide financial incentive of 25 percent on capital expenditure for the identified list of electronic goods, i.e., electronic components, semiconductor/ display fabrication units, Assembly, Test, Marking and Packaging (ATMP) units, specialized sub-assemblies and capital goods for manufacture of aforesaid goods. The EMC 2.0 shall provide support for creation of world class infrastructure along with common facilities and amenities, including Ready Built Factory (RBF) sheds / Plug and Play facilities for attracting major global electronics manufacturers, along with their supply chains.

The three new schemes are expected to attract substantial investments, increase production of mobile phones and their parts/ components to around Rs 10,00,000 crore by 2025 and generate around 5 lakh direct and 15 lakh indirect jobs. The government aims to attract top 5 global mobile manufacturing companies who control 80 per cent of the global market in the segment and also promote five local companies in expanding their business as national champions.

TEMA meets DoT

The Telecom Equipment Manufacturers Association (TEMA) in its meeting with Anita Praveen, additional secretary (telecom) and Hari Ranjan Rao, joint secretary (telecom), DoT requested that the telecom PLI not be similar to the electronics PLI scheme, as the former is for B2B, the service providers and the latter B2C, the 1.3 billion Indian population.

The requests included:

  • That the telecom PLI include mandatory eligibility criteria, commitment and compliance on domestic value addition, exports, employment and technology absorption.
  • The telecom PLI be for indigenously developed, manufactured products and not for assembly. It could however be available for domestic production that may be for domestic consumption or exports.
  • It is clear that PLI is not a substitute for MEIS, which is available to all exporters whether existing or new. The PLI on electronics on the other side is primarily on production and not related to exports.
  • The telecom PLI is expected to address the disability factor for Indian manufacturing and the industry asked for 5-10 percent of the incentive.
  • Some members said that there should be no norm for value addition. In contrast, some members and TEMA supported to avoid almost 100 percent import of components, and value addition be the eligibility criteria.
  • Some members said that electronics PLI is only for exports. TEMA said that the electronics PLI does not talk of exports as eligibility, criteria or compliance. However the presentation on electronics PLI scheme forecasts the exports of 5.8 lakh crores over five years. The electronics PLI Scheme is on production, they reiterated.

Ravi Shankar Prasad
Minister of Electronics and IT,
Government of India

“India as a major country of the world with appropriate technology, capital including FDI and extraordinary human resource is contributing significantly to the global economy.”

Sunil Vachani
CMD,
Dixon Technologies

“The schemes announced by the government are a game changer. This is the first time the government has come up with a scheme to promote local companies as national champions. The scheme will help Indian mobile manufacturing companies to go global as well. We will apply for the PLI scheme shortly. Dixon plans to invest Rs 250 crore and hire 2,500 people over a period of next 8-9 months.”

Arijit Sen
Senior Director (Global Government Affairs and Public Policy),
Flex

“Flex is looking to move some of our facilities from a neighbouring country to Tamil Nadu. We have sought the state government’s help in expediting the processes to expand our facility near Chennai.”

Click to comment

You must be logged in to post a comment Login

Leave a Reply

error: Content is protected !!