Electronics permeate all sectors of the economy and the electronics industry has cross-cutting economic and strategic importance. In India, electronics manufacturing has grown rapidly with a CAGR of around 25 percent during the last 4 years. However, this pales in comparison to the actual potential for growth which is curtailed by specific constraints such as large capital investments and rapid changes in technology. The domestic electronics hardware manufacturing sector faces lack of a level playing field vis-à-vis competing nations. The sector suffers disability of around 8.5 percent to 11 percent.
With a view to position India as a global hub for electronics system design and manufacturing (ESDM) the government had launched Production Linked Incentive scheme (PLI) for large scale electronics manufacturing in April 2020. The scheme offers a production linked incentive to boost domestic manufacturing and attract large investments in mobile phone manufacturing and specified electronic components, including assembly, testing, marking and packaging (ATMP) units.
Now, under the scheme, the government is proposing to include air conditioners and televisions as well, where a limited level of manufacturing exists in the country but major components are still imported. The finance ministry, along with the commerce and other ministries, is in the process of finalizing the specifications of the PLI scheme for each identified area of manufacturing. The scheme for new sectors is anticipated to be similar to the earlier ones introduced for the development of a mobile manufacturing ecosystem in the country.
The new scheme would be a replacement of the current Merchandise Exports India Scheme (MEIS), introduced in April 2015, with the objective to promote manufacturing and exports of specified goods from India. But it failed to boost exports as it could not yield the expected outcome.
The Ministry of Commerce and Industry have blocked the online system for exporters to avail tax incentives under the Merchandise Export from India Scheme (MEIS) from July 23, 2020 since the Department of Revenue has limited the benefits under the scheme at Rs 9000 crore for April-December 2020. The liability under MEIS increased from Rs 20,000 crore to about Rs 45,000 crore in 2019-20; however, exports remained inadequate.
Hence, PLI has been identified as part of Aatmanirbhar Bharat mission, which aims to work on import substitution and enhance domestic manufacturing. In the current target segments, the 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 target segments, to eligible companies, for a period of 5 years subsequent to the base year as defined. It is expected to tremendously boost the electronics manufacturing landscape and establish India at the global level in electronics sector. TVJ Bureau