Govt. Approves Rs. 22,919 Cr. Scheme for Electronic Components Manufacturing

Union Cabinet has approved a scheme with a funding of Rs. 22,919 crore to boost domestic manufacturing of electronic components. This scheme will be active for the next 6 years (till FY-32).

Unlike Production-Linked Incentive (PLI) schemes introduced earlier, incentives under this scheme will be based on turnover and employment generation.

Govt. Expects Rs. 59,350 Cr. of Investments, Over Rs. 4.56 Lakh Cr. of Production

With this scheme, the Indian Government expects investments totalling to Rs. 59,350 crore by various public and private players to pour into electronics manufacturing. Government envisages Rs. 4,56,500 crore worth of electronic components production during the lifetime of this scheme. Apart from this, the scheme is also expected to create 91,600 direct employments.

Production of Smaller Electronic Components to Increase Domestic Value Addition

Through this scheme, the Government targets increasing Domestic Value Addition (DVA) in electronic components. This will be done by boosting sub-assembly electronic components and passive electronic components.

Currently, smaller electronic components which are used in electronics manufacturing, such as in the production of smartphones, need to be imported. Therefore through incentivising domestic production of smaller electronic components, the DVA in their production will increase.

As per Mr. Ashwini Vaishnaw, Union Minister for Information and Broadcasting and Railways, “Countries that have done electronics manufacturing for more than three decades have been able to reach a high of domestic value addition of 38-40%. We have within ten years already reached 20%. Now we must target doubling this [share] in the coming five years”.

Four Target Segments Identified, Different Criteria for Incentives

Aforementioned scheme identifies four target segments namely, ‘sub-assemblies’, ‘bare components’, ‘supply chain ecosystem and capital equipment for electronics manufacturing’, and ‘selected bare components’. However, Government has not yet announced the segment-wise outlay of the scheme.

Turnover-based Incentives for Sub-Assemblies & Bare Components

The scheme offers turnover-based incentives for stimulating production in the first two segments. In case of ‘sub-assemblies’, display module sub-assembly and camera module sub-assembly are covered. In the ‘bare components’ segment, turnover-based incentives are offered for non-Surface Mount Devices (non-SMD) passive components, multi-layer PCBs, Li-ion cells, and electro-mechanical components which are used in electronics manufacturing. Apart from this, enclosures for mobiles and smartphones, and other electronic devices are also included in this second segment.

CapEx-based Incentives for ‘Supply-chain Ecosystem’ & Electronics Manufacturing Equipment

Production of smaller components and parts which are used in the manufacturing of sub-assemblies and bare components mentioned above will be incentivised based on CapEx of the applying manufacturers. Moreover, essential goods, which include ‘capital equipment for electronics manufacturing’ will also be CapEx-incentivised under this scheme.

Hybrid-incentives for ‘Selected’ Bare Components

Apart from turnover and CapEx based incentives, the scheme will offer ‘hybrid incentives’ for increasing production of some selected bare components such as High-density interconnect (HDI)/ Modified semi-additive process (MSAP)/ Flexible PCB, and SMD passive components. However, the specific criteria of these ‘hybrid’ incentives have not been disclosed.

Domestic Production Value of Electronics Grew Fivefold in Last Decade

Considering the period from FY-15 to FY-25, electronics production in India grew to Rs. 9.52 lakh crore from Rs. 1.90 lakh crore, which represents a fivefold increase. The Compound Annual Growth Rate (CAGR) of electronics production at the country has been over 17% during the aforementioned period. Looking ahead, electronics production in India is projected to grow to about Rs. 23.95 lakh crore by FY-30, as per a July 2024 report by NITI Aayog.

However, the report adds, “India’s electronics market…[accounts] for only 4% of the global market…with limited capabilities in design and component manufacturing”. This suggests that there is a void in electronics manufacturing in India when it comes to sub-assemblies and smaller components. Therefore, the aforementioned scheme is a step towards addressing this problem.