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Subsidy spark for electronics manufacturing sector

December 12, 2012 10:02 IST

The government is set to give the domestic electronics manufacturing sector a Rs 10,000 crore (Rs 100 billion) boost, through a Modified Special Incentive Package Scheme (M-SIPS).

As part of the scheme, the government will give financial incentives to private companies to set up manufacturing units in India.

"We have started inviting applications from Indian and global electronics manufacturing companies who are willing to set up manufacturing units in India under the M-SIP scheme," a senior government official said.

Earlier this week, the government had invited proposals from private players to set up manufacturing units in India, under the scheme. Within a day of inviting proposals, we have received a tremendous response, the official added.

Under M-SIPS, the government would provide a subsidy of 20 per cent for capital expenditure in special economic zones (SEZs) and 25 per cent in non-SEZs for individual companies.

Besides financial support, the scheme would also provide incentives for relocation of units from abroad. This means, if a foreign player wants to shift its existing manufacturing units from some other country to India, they will get capital incentives under the scheme.

However, the amount of capital incentive is yet to be finalised for such players.

The incentives would be available for 29 categories of products, including telecom, information technology hardware, consumer electronics, medical electronics, automotive electronics, solar photovoltaic and semiconductor chips and chip components.

The scheme is part of the National Electronics Policy, which was announced in October this year. The policy proposes to achieve domestic electronics goods production of about $400 billion by 2020.

The move is expected to create a domestic electronics manufacturing ecosystem and to fill the gap between domestic demand and supply in electronics goods.

The consumption of electronics goods in India has skyrocketed over the last decade. However, most of the electronics goods sold in India are currently imported. According to various estimates, the import of electronics goods by India is expected to reach $300 billion by 2020, even more than what the country will be spending towards importing petroleum products.

Almost all the domestic consumption is met through imported electronics items. The current electronics market in the country is pegged at about $80 billion of which only $5 billion worth of goods are assembled in India.

The government had approved many schemes to promote large-scale manufacturing in the Electronic System Design and Manufacturing sector as a part of the national electronics manufacturing scheme.

M-SIPS would also provide reimbursement of countervailing duty or excise for capital equipment for the non-SEZ units. For high technology and high capital investment units, reimbursement of central taxes and duties would also be provided.

Besides giving impetus to the manufacturing sector, the projects have the potential to create employment for nearly 0.5 million people.

Piyali Mandal in New Delhi
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