The Union Budget 2020 is scheduled to be presented by the Finance Minister, Nirmala Sitharaman on February 1, 2020. CEAMA and ELCINA have sent their recommendations to the ministry.
The Indian electronics industry is facing disability of 10–12 percent in comparison with their international counterparts, such as China and Vietnam, among others. This is a well-identified disability and also has a mention in the government’s policy documents.
In this Budget, the government needs to address this disability and help the electronics system development and manufacturing (ESDM) sector through the measures:
Incentives for capital investment in electronics manufacturing
The scheme in line with the erstwhile Modified Special Incentive Package Scheme (MSIPS) is required for components (including semiconductors), printed circuit boards (PCBs), and assembly testing mark pack (ATMP) of semiconductors by providing direct investment subsidy.
It is important that the scheme is simple to implement through a professional financial institution required for enhancing competitiveness. The recommended CapEx benefit should be differentiated with higher benefits to micro, small, and medium enterprises (MSMEs).
Electronic component manufacturing fund
A dedicated fund for the development of component-manufacturing ecosystem should be floated on the lines of a venture fund with income tax breaks on its earnings, thus providing low-cost capital for high-value-added electronics manufacturers. Huge investments are required to achieve the target of net zero imports in electronics and output of USD 400 billion by 2025, envisaged at USD 100 billion (`7 lakh crore). This needs a mega pool of low-cost funds to be invested in ESDM manufacturing and research.
Promote electronic manufacturing clusters (EMCs) by inviting state governments to take ownership of smooth operation and success of clusters; provide plug-and-play facilities to the interested manufacturers on attractive lease agreements; reduce investment in land and infra and emphasis on sale of land; manufacturing is incentivized by availability of land for manufacturing at a low operational cost and the cluster.
OpEx subsidy/working capital subsidy
This provision was introduced under the MSIPS scheme vide notification of August 3, 2015, including high-value-added items, such as semiconductor wafering, logic microprocessors, integrated circuits (ICs), and components, such as PCB, discrete semiconductors fab, power semiconductors fab, and ATMP, among others.
It is recommended this production subsidy (OpEx) should be provided to electronic components by either of the two options – production subsidy of 6 percent of consignment value should be provided to component manufacturers. This should be done on automatic basis with one-time approval of the project by the Ministry of Electronics and Information Technology (MeitY). The subsidy should be available for a period of 5 years and 3 percent for the next 5 years.