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Rs 50,000 crore committed for electronics manufacturing, will it propel telecom manufacturing too?

The government has announced an outlay of Rs 50,000 crore (approximately USD 7 billion) for the three schemes announced on April 1, 2020, PLI, SPECS and EMC 2.0. The schemes will help offset the disability for domestic electronics manufacturing and hence, strengthen the electronics manufacturing ecosystem in the country. The three schemes together will enable large scale electronics manufacturing, domestic supply chain of components and state-of-the-art infrastructure and common facilities for large anchor units and their supply chain partners. These schemes shall contribute significantly to achieving a USD 1 trillion digital economy and a USD 5 trillion GDP by 2025.

This includes the telecom equipment manufacturers, Nokia, Ericsson, Samsung, and Huawei that are making telecom equipment in India but the local content addition is around 40 percent. The government wants it to increase it to 100 percent. However, Indian players are sourcing some of the components from abroad, so even they are not 100 percent indigenous.

Under the scheme, companies could make specified telecom products in India. These include 5G next generation radio access network equipment and associated systems, 5G base station and core equipment, switches, routers, optic fibre cables and digital microwave radios, among others.

DoT is scheduled to meet with the vendors today, June 3 to take their suggestions and discuss how manufacturing in India can be expanded.

Backgrounder

The government headed by Prime Minister Narendra Modi has always believed in transformative programs be it Digital India, Make in India, and Startup India. These initiatives have empowered ordinary Indians, led to digital inclusion, encouraged innovation and entrepreneurship and raised the stature of India as a global digital power.

Promotion of electronics manufacturing has been a key component of Make in India program. With efforts such as the National Policy on Electronics, 2019, Modified Special Incentive Scheme (MSIPS), Electronics Manufacturing Clusters and Electronics Development Fund etc., India’s production of electronics grew from USD 29 billion in 2014 to USD 70 billion in 2019. The growth in mobile phone manufacturing in particular has been remarkable during this period. From just 2 mobile phone factories in 2014, India now has become the 2nd largest mobile phone producer in the world.  Production of mobile handsets in 2018-19 has reached 29 crore units worth Rs. 1.70 lakh crore from just 6 crore units worth Rs. 19,000 crore in 2014. While the exports of electronics has increased from Rs. 38,263 crore in 2014-15 to Rs. 61,908 crore in 2018-19, India’s share in global electronics production has reached 3 percent in 2018 from just 1.3 percent in 2012.

Prime Minister Narendra Modi has given a clarion call for Aatma Nirbhar Bharat – a self-reliant India.  Ravi Shankar Prasad has often elaborated that this does not mean India in isolation but India as a major country of the world with appropriate technology, capital including FDI and extraordinary human resource contributing significantly to the global economy. India may need to revisit free trade agreements (FTAs) with several countries, as they continue to hamper the country’s plan to emerge as a manufacturing powerhouse for electronics, said the minister.

With a view to building a robust manufacturing ecosystem, which will be an asset to the global economy we are looking forward to developing a strong ecosystem across the value chain and integrating it with global value chains. This is the essence of these three Schemes namely, the (i) Production Linked Incentive Scheme (PLI) for Large Scale Electronics Manufacturing, (ii) Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS) and (iii) Modified Electronics Manufacturing Clusters (EMC 2.0) Scheme.

The PLI 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 the target segments, to eligible companies, for a period of five years subsequent to the base year. The SPECS shall provide financial incentive of 25 percent on capital expenditure for the identified list of electronic goods, i.e., electronic components, semiconductor/ display fabrication units, Assembly, Test, Marking and Packaging (ATMP) units, specialized sub-assemblies and capital goods for manufacture of aforesaid goods. The EMC 2.0 shall provide support for creation of world class infrastructure along with common facilities and amenities, including Ready Built Factory (RBF) sheds / Plug and Play facilities for attracting major global electronics manufacturers, along with their supply chains.

The three new schemes are expected to attract substantial investments, increase production of mobile phones and their parts/ components to around Rs.10,00,000 crore by 2025 and generate around 5 lakh direct and 15 lakh indirect jobs. The government aims to attract top 5 global mobile manufacturing companies who control 80 per cent of the global market in the segment and also promote five local companies in expanding their business as national champions.

QUOTES

“India as a major country of the world with appropriate technology, capital including FDI and extraordinary human resource is contributing significantly to the global economy.”
Ravi Shankar Prasad, Minister of Electronics and IT, GoI

“Today’s announcement by the Government on the schemes to boost electronic manufacturing in India had been in the works for almost 2-3 months and we applaud this initiative which is officially active now. MAIT is delighted on the introduction of this policy, the formulation of which was deliberated aggressively with the stakeholders.

The mobile manufacturing industry is very positive about the move and this scheme will help meet the targets under NPE 2019. This will certainly lead to companies moving their supply chains to India. To increase the job creation, component manufacturing needs to be moved too. This will not only spur manufacturing but will make India an export-led global manufacturing hub for mobile phones.

 Also, it is imperative that the government bring the major electronics ecosystem on board through these schemes. The interruption in the global supply chain due to the pandemic gives India an opportunity to increase export-led manufacturing and broadening the scope of PLI to all other major sectors of electronics such as Consumer electronics, ICT, CPE products, Computers, Medical Electronics etc. will be a game-changer.”
Nitin Kunkolienker, President, MAIT

 “This scheme is a game changer for the nation and the industry, a historic development under the leadership of Prime Minister Modi to advance the “Make in India (MII)” program”.
Pankaj Mohindroo, Chairman, Indian Cellular and Electronics Association

“Flex is looking to move some of our facilities from a neighbouring country to Tamil Nadu. We have sought the state government’s help in expediting the processes to expand our facility near Chennai.”
Arijit Sen, Senior Director (Global Government Affairs and Public Policy), Flex

“The schemes announced by the government are a game changer. This is the first time the government has come up with a scheme to promote local companies as national champions. The scheme will help Indian mobile manufacturing companies to go global as well. We will apply for the PLI scheme shortly. Dixon plans to invest Rs 250 crore and hire 2,500 people over a period of next 8-9 months.”
Sunil Vachani, CMD, Dixon Technologies which manufactures feature phones for Samsung and smart TVs for Xiaomi

Please also read, https://www.tvj.co.in/strengthening-manufacturing/

—TVJ Bureau

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