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PLI To Boost The Electronics Manufacturing Sector in India

PLI Scheme

Production Linked Incentives of up to INR 40,951 crores will be awarded over a period of 5 years.

Electronics manufacturing in India has grown rapidly with a CAGR of around 25% during the last 4 years, with domestic production of electronics hardware touching $70 bn in 2018-19.  The electronics manufacturing industry currently provides employment for over 20,00,000 people in India, of which mobile manufacturing alone accounts for over 6,00,000 jobs. To further facilitate large-scale manufacturing, development of a supply chain ecosystem, and building of new manufacturing clusters in the country, each electronic manufacturing scheme has been carefully constructed to incentivize the electronics manufacturing industry.

With the Union Cabinet announcing measures to boost electronics manufacturing in India such as production linked incentives for 10 sectors worth almost Rs. 1.5 lakh crore,

The Union Cabinet has given its approval to introduce the Production-Linked Incentive (PLI) Scheme in 10 more sectors for enhancing India’s manufacturing capabilities and exports (Atmanirbhar Bharat).

  • Earlier, the government had announced a production linked incentiveor PLI scheme for medical devices, mobile phones and specified active pharmaceutical ingredients, with a proposed outlay of Rs. 51,311 crore.

Key Points

  • PLI Scheme:
    • A scheme that aims to give companies incentives on incremental sales from products manufactured in domestic units.
    • The scheme invites foreign companies to set units in India, however, it also aims to encourage local companies to set up or expand existing manufacturing units.

All electronic manufacturing companies which are either Indian or have a registered unit in India will be eligible to apply for the scheme. These companies can either create a new unit or seek incentives for their existing units from one or more locations in India.

Any additional expenditure incurred by companies on plant, machinery, equipment, research and development and transfer of technology for manufacture of mobile phones and related electronic items will be eligible for the incentive scheme.

However, all investment done by companies on land and buildings for the project will not be considered for any incentives or determine eligibility of the scheme.

  • Mobile Phones
  • Specified Electronic Components
    • SMT components
    • Discrete semiconductor devices including transistors, diodes, thyristors, etc.
    • Passive components including resistors, capacitors, etc. for electronic applications
    • Printed Circuit Boards (PCB), PCB laminates, prepregs, photopolymer films, PCB printing inks
    • Sensors, transducers, actuators, crystals for electronic applications
    • System in Package (SIP)
    • Micro / Nano-electronic components such as Micro Electromechanical Systems (MEMS) and Nano Electromechanical Systems (NEMS)
    • Assembly, Testing, Marking and Packaging (ATMP) units

Eligibility

SEGMENT PROPOSED INCENTIVE RATE INCREMENTAL INVESTMENT OVER BASE YEAR INCREMENTAL SALES OF MANUFACTURED GOODS OVER BASE YEAR
Mobile Phones (Invoice value of INR 15,000 and above) * Year 1: 6%
Year 2: 6%
Year 3: 5%
Year 4: 5%
Year 5: 4%
INR 1,000 Crore over 4 Years Cumulative Minimum (Crore):
Year 1: 250
Year 2: 500
Year 3: 750
Year 4: 1,000
Year 1: INR 4,000 Crore
Year 2: INR 8,000 Crore
Year 3: INR 15,000 Crore
Year 4: INR 20,000 Crore
Year 5: INR 25,000 Crore
Mobile Phones (Domestic Companies) ** INR 200 Crore over 4 Years Cumulative Minimum (Crore):
Year 1: 50
Year 2: 100
Year 3: 150
Year 4: 200
Year 1: INR 500 Crore
Year 2: INR 1,000 Crore
Year 3: INR 2,000 Crore
Year 4: INR 3,500 Crore
Year 5: INR 5,000 Crore
Specified Electronic Components INR 100 Crore over 4 Years Cumulative Minimum (Crore):
Year 1: 25
Year 2: 50
Year 3: 75
Year 4: 100
Year 1: INR 100 Crore
Year 2: INR 200 Crore
Year 3: INR 300 Crore
Year 4: INR 450 Crore
Year 5: INR 600 Crore

*For eligibility all Incremental Sales of Manufactured Goods (covered under target segments) irrespective of Invoice Value shall be considered.

Mr. Rajesh Uttamchandani, Director, Syska Group said, “The announcement by the Union Cabinet approving a mega production linked incentive (PLI) scheme for 10 sectors with an aim to provide much required impetus to the manufacturing sector is a welcome move. The PLI scheme is aimed at promoting domestic manufacturing and revolutionizing the ‘Make in India’ campaign by making India a global player in the export supply chain and in increasing core competencies of the country, providing a boost to the economy. For homegrown FMEG companies like Syska Group this is a great initiative that will enable us to further develop solutions in-house and focus on domestic manufacturing and generating further employment opportunities. We are positive that such schemes are set to bolster India’s economic growth by making it truly Atmanirbhar.”

Mr. Kishan Jain, Director at Goldmedal Electricals said, “We welcome the Government’s decision to provide a further boost to the electronics manufacturing sector in India during the current times. The move to support the labour intensive sectors by offering production-linked incentives (PLIs) of a little under Rs 1.5 lakh crore to the 10 sectors of the economy, will provide a much needed fillip to the Indian manufacturing sector. This initiative will create more opportunities for Indian and global electronic companies to set up operations within the country, increase manufacturing capabilities, boost production and generate employment. This scheme will make Indian manufacturers competitive globally, attract foreign investment and create a roadmap to use cutting-edge technology enhance exports and making India a primary leader in the global supply. All of these steps will help homegrown companies such as Goldmedal Electricals towards further enhancing our growth strategy and help India to become a global manufacturing hub.”

Parag Naik, CEO & Co-Founder, Saankhya Labs said, “”We welcome the government’s move to boost the electronics manufacturing segment in India. Amidst the current business environment, the decisions taken by the Union Cabinet to support manufacturing in India’s semiconductor segment will augur well for Indian electronic companies. Measures announced such as a production-linked incentive scheme (PLI) for promoting manufacturing of electronic components and semiconductors SPECS) and Electronics Manufacturing Clusters (EMC) 2.0 are going to provide a much needed fillip to the sector. We hope that the government’s assurance of providing a financial incentive of 25 per cent on capital expenditure for the identified list of electronic goods including electronic components and semiconductors, enable India to become the semiconductor manufacturing hub of the world. This will also benefit indigenous companies like Saankhya Labs by enhancing their business capabilities enabling them to grow and expand further.”

 Overview:

India has the potential to become a global hub for components manufacturing due to availability of cost-effective skilled manpower, fast improving infrastructure and the Government’s push for Ease of Doing Business in the country. The size of Indian electronic components market has increased at a CAGR of 32% to $20.8 bn in 2018-19. Moreover, the market opportunity for electronic components in India is expected to be around $200 bn by 2025.

The Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS) aims to strengthen the manufacturing ecosystem for electronic components and semiconductors. Target manufacturing of electronic components and semiconductors through the scheme will help meet domestic demand, increase value addition and promote employment opportunities in this sector.

Incentives of up to INR 3,285 crore will be awarded under the Scheme over a period of 8 years.

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