The Union Cabinet is soon expected to take up for consideration a scheme that will aim at boosting the manufacturing of smart phones, semi-conductors, and other high-value tech goods.
This proposal is likely to replace existing schemes like the Modified Special Incentive Package Scheme (MSIPS), Electronic Manufacturing Clusters (EMC), and Electronics Development Fund (EDF), Business Standard has learnt.
The scheme was first announced by Finance Minister Nirmala Sitharaman in the Union Budget this year. Work on the scheme is being speeded up because India sees opportunities in the light of companies looking to shift their manufacturing base from China due to the coronavirus epidemic.
“The process of drafting the scheme, deciding its contours, and getting it started are being expedited in the light of the situation in China. Based on our conversations with companies that are interested in moving their manufacturing bases out of China, we do see opportunities,” said a senior finance ministry official.
It is learnt that the scheme will encompass multiple proposals that will require Cabinet approval, mostly from the Ministry of Electronics and Information Technology (MEITY).
“The proposals have to be sent to the Cabinet and may be approved in a few weeks. Because of the coronavirus situation, they might look at the proposals more favourably,” said a MEITY official. “Because of the coronavirus, there is an overlap and some proposals are being discussed with the finance ministry,” the person added.
Some details, like the outlay, are still being worked out, officials said. It is likely that the outlay of the new scheme will slightly exceed the allocations for those it will replace. In MEITY’s budget, the three programmes have been allocated Rs 980 crore for 2020-21, compared with the 2019-20 revised estimates of Rs 690 crore and budgeted estimates of Rs 986 crore.
“I propose a scheme focused on encouraging the manufacture of mobile phones, electronic equipment, and semi-conductor packaging. The details would be announced later,” Sitharaman had said in the Budget.
In their meetings with Sitharaman last week, representatives of a number of sectors spoke about the need for India to build manufacturing capacity long-term for goods, raw materials, components and active pharmaceutical ingredients, for which they now have a huge dependence on China.
Earlier this month, at a post-Budget media interaction, Sitharaman had said 10-12 companies, among those searching for alternatives to China, had spoken to the government. “I feel their expectations from us are quite realistic and reasonable,” she had said. It is learnt that these talks are being held by multiple government departments, including the finance ministry, commerce ministry, NITI Aayog and MEITY.
The MSIPS ran between 2012 and 2018, and promised multiple incentives for 10 years, including a capital subsidy of 20 per cent in special economic zones (SEZs) and 25 per cent in non-SEZs, and reimbursements of countervailing duty or excise on capital equipment for non-SEZ units. For some high-capital projects, it also offered reimbursements of central taxes and duties. Industry has been asking for an extension of the scheme.
The EDF was set up as a fund of funds to encourage research and development in areas like electronics, IT and nano-electronics to promote a component manufacturing ecosystem in the country that will go beyond making mobile phones.
The Electronics Manufacturing Clusters (EMC) scheme was notified in 2012 to provide support for creating infrastructure to attract investment in the Electronics Systems Design and Manufacturing (ESDM) sector.
The new scheme is expected to include features and sops from the schemes it will replace. MEITY Minister Ravi Shankar Prasad has said time and again a big focus of the government is to make India a big export hub for electronics.
The National Policy on Electronics, approved by the Cabinet last February, had a provision for “attractive package of incentives for promoting export of electronics goods, thereby empowering the exporters by facilitating global market access”. Business Standard