Lok Sabha Question No. 4087 (UNSTARRED), answered on 2019-07-17
Subject: Incentives to Electronics Industry
Ministry: ELECTRONICS AND INFORMATION TECHNOLOGY
Asked by: Riti Pathak

## GOVERNMENT OF INDIA MINISTRY OF ELECTRONICS AND INFORMATION TECHNOLOGY

## LOK SABHA UNSTARRED QUESTION NO. 4087

TO BE ANSWERED ON 17.07.2019

## INCENTIVES TO ELECTRONICS INDUSTRY

## 4087    SHRIMATI RITI PATHAK:

Will the Minister of ELECTRONICS AND INFORMATION TECHNOLOGY be pleased to state:

- (a) the details of the incentives given by the Government to the electronics industry under the National Electronics Policy;
- (b) whether the Government is contemplating to announce a special package to promote the electronics export from the country and if so, the details thereof; and
- (c) whether  the  Government  is  taking  any  steps  to  do  away  with  the  problems  faced  in  electronics exports from the country to provide ease of doing business and if so, the details thereof?

## ANSWER

## MINISTER FOR ELECTRONICS AND INFORMATION TECHNOLOGY (SHRI RAVI SHANKAR PRASAD)

(a): Steps taken by the Government for promotion of domestic electronics manufacturing industry and exports from the country, including the details of  incentives provided to the electronics industry,  are annexed . The  incentives  given  to  the  electronics  industry  under  the  aegis  of  National  Policy  on Electronics 2012 (NPE 2012) inter-alia include the following:

- (i)   Modified Special Incentive Package Scheme (M-SIPS) for providing financial incentives to offset disability and attract investments in the Electronics System Design and Manufacturing (ESDM) sector.
- (ii)   Electronics Manufacturing Clusters (EMC) Scheme for providing financial support for creation of state-of-art infrastructure for electronics manufacturing units.
- (iii)    Electronics  Development  Fund  (EDF)  has  been  set  up  as  a  'Fund  of  Funds'  to  participate  in professionally managed 'Daughter Funds' which in turn will provide risk capital to companies developing  new  technologies  in  the  area  of  electronics,  nano-electronics  and  Information Technology.
- (iv)    Tariff  rationalization, including the Phased Manufacturing Programme (PMP) for promotion of domestic manufacturing of mobile handsets and sub-assemblies/ parts thereof.

Further,  the  Government  has  notified  the  National  Policy  on  Electronics  2019  (NPE  2019)  on 25.02.2019,  with  the  vision  to  position  India  as  a  global  hub  for  ESDM  and  create  an  enabling environment for the industry to compete globally. The NPE 2019 replaces the NPE 2012. NPE 2019 is available at the following link: https://meity.gov.in/esdm/policies.

(b) and (c): The following package of incentives has been made available for promoting indigenization and export of electronics from the country:

- (i) Procedural  simplification  for  import  of  second  hand  manufacturing  plant  and  machinery : Ministry  of  Environment,  Forests  and  Climate  Change  (MoEF&CC)  vide  Notification  dated 11.06.2018 has simplified the import of used plant and machinery having a residual life of at least 5 years for use by the electronics manufacturing industry through the amendment of Hazardous and Other Wastes (Management and Transboundary Movement) Rules, 2016.
- (ii) Support  for  Brand-building  and  promoting  investment  in  electronics  manufacturing  and export  of  electronic  goods :  Department  of  Commerce  will  support  promotion  of  sector  specific visits under the Market Access Initiative (MAI) Scheme for ESDM and the India Brand Equity Fund (IBEF)  would  assist  MeitY  in  promoting  the  Brand  India  Label  in  the  ESDM  sector  in  overseas market.
- (iii) Expanding  the  list  of  capital  goods  required  for  manufacture  of  electronic  goods  for  Basic Customs Duty (BCD) exemption :  A list of capital goods, not manufactured in India, required for manufacture  of  specified  electronic  goods  has  been  notified  by  the  Department  of  Revenue  vide Notification  No.22/2019-Customs  dated  06.07.2019.  This  will  help  reduce  capital  expenditure  for setting up/ expansion of existing units and address the disabilities to a certain extent.
- (iv) Enhancement  of  incentive  under  the  Merchandise  Exports  from  India  Scheme  (MEIS)  for electronic goods : In order to give a boost to electronics exports, MEIS rate has been enhanced from 2% to  4%  for  several  electronic  goods,  covering inter-alia telecom  equipment,  including  cellular mobile  phones;  electronic  components;  electronic  integrated  circuits;  transmission  apparatus  for radio  broadcasting  or  television;  radio  broadcast  receivers,  radar  apparatus  and  indicator  panels incorporating LCD or LED.
- (v) Relaxation of ageing restriction imposed for duty free import of electronic goods for repair or reconditioning,  from  3  years to  7  years : The  Department  of  Revenue  vide  Notification No.60/2018-Customs  dated  11.09.2018  has  relaxed  the  ageing  restriction  for  specified  electronic goods manufactured in India and re-imported into India for repairs or for reconditioning.

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## Annexure

## Steps taken by the Government for promotion of domestic electronics manufacturing industry and exports from the country

- (i) Modified Special Incentive Package Scheme (M-SIPS) provides financial incentives to offset disability and attract investments in the electronics manufacturing sector. The scheme was open to receive applications till 31.12.2018  for  new  projects  as  well  as  expansion  projects.  The  scheme  provides  20-25%  subsidy  for investments in capital expenditure for setting up of an electronic manufacturing facility (20% for SEZ Units and  25%  for  non-SEZ  Units).  The  incentives  are  available  for  44  categories  of  electronic  products  and product  components.So  far,  212  projects  have  been  approved  with  proposed  investments  of  INR  55,182 crore. The incentives committed against these 212 projects are INR 5,635 crore.
- (ii) The Electronics Manufacturing Clusters (EMC) Scheme was notified to provide financial support for creation of  state-of-art  infrastructure  for  electronics  manufacturing  units.  The  scheme  was  open  for  receipt  of application  for  a  period  of  5  years,  i.e.,  upto  21.10.2017.  Further  period  of  5  years  is  available  for disbursement of funds  for  the  approved  applicants.  Under  the  scheme,  financial  assistance  for  Greenfield EMC was available upto 50% of the project cost subject to a ceiling of INR 50 crore for every 100 acres of land and for Brownfield EMC, 75% of the cost of infrastructure, subject to a ceiling of INR 50 crore was provided as Grant. Under the scheme, approval has been accorded for setting up of 20 Greenfield EMCs and 3 Common Facility Centres (CFCs) in 15 States across the country.
- (iii) Tariff  Structure  has  been  rationalized  to  promote  domestic  manufacturing  of  electronic  goods,  including, inter-alia, Cellular  mobile  handsets,  Televisions,  Electronic  components,  Set  Top  Boxes  for  TV,  LED products and Medical electronics equipment.  To promote domestic value addition in mobile handsets and their parts/ components manufacturing, a Phased Manufacturing Programme (PMP) has been notified. As a result,  India  has  rapidly  started  attracting  investments  into  this  sector  and  significant  manufacturing capacities have been set up in the country during the past four years. The manufacturing of mobile handsets and  their  parts/  components  has  been  steadily  moving  from  Semi  Knocked  Down  (SKD)  to  Completely Knocked Down (CKD) level, thereby progressively increasing the domestic value addition.
- (iv) As per extant Foreign Direct Investment (FDI) policy, FDI upto 100% under the automatic route is permitted for electronics manufacturing, subject to applicable laws/ regulations; security and other conditionalities.
- (v) For  promotion  of  exports  in  the  sector,  Merchandise  Exports  from  India  Scheme  (MEIS)  and  Export Promotion  Capital  Goods  (EPCG)  Scheme  are  available  under  the  Foreign  Trade  Policy,  2015-20.  MEIS offers export incentives so as to offset disabilities of manufacturing. Zero duty EPCG scheme allows import of capital goods at zero customs duty, subject to specified export obligation.
- (vi) The import of used plant and machinery having a residual life of at least 5 years for use by the electronics manufacturing  industry  has  been  simplified  through  the  amendment  of  Hazardous  and  Other  Wastes (Management  and  Transboundary  Movement)  Rules,  2016,  vide  Ministry  of  Environment,  Forest  and Climate Change Notification dated 11.06.2018.
- (vii) Notified capital goods for manufacture of specified electronic goods are permitted for import at 'Nil' Basic Customs Duty.
- (viii) The  Department  of  Revenue  vide  Notification  No.60/2018-Customs  dated  11.09.2018  has  amended  the Notification No.158/95-Customs dated 14.11.1995, relaxing the ageing restriction from 3 years to 7 years for specified electronic goods manufactured in India and re-imported into India for repairs or reconditioning.
- (ix) In order to ensure safety of Indian citizens by curbing import of substandard and unsafe electronic goods into India,  MeitY  has  notified  'Electronics  and  Information  Technology  Goods  (Requirement  of  Compulsory Registration) Order, 2012' for mandatory compliance. As per the provisions of the order, the manufacturer has to get the product tested in laboratories recognized by Bureau of Indian Standards (BIS), take registration from BIS and put the registration mark on the product. 44 product categories have been notified under the order.
- (x) The Government has notified Public Procurement (Preference to Make in India) Order 2017 to encourage 'Make in India' and to promote manufacturing and production of goods and services in India with a view to enhancing income and employment.  In furtherance of the aforesaid Order, MeitY has notified local content for  11  Electronic  Products,  viz.,  Desktop  PCs,  Laptop  PCs, Tablet  PCs,  Dot Matrix  Printers,  Contact  and Contactless  Smart  Cards,  LED  Products,  Biometric  Access  Control/  Authentication  Devices,  Biometric Finger Print Sensors, Biometric Iris Sensors, Servers, and Cellular Mobile Phones.
- (xi) The National Policy on Electronics 2019 (NPE 2019) has been notified on 25.02.2019. The vision of NPE 2019  is  to  position  India  as  a  global  hub  for  Electronics  System  Design  and  Manufacturing  (ESDM)  by encouraging and driving capabilities in the country for developing core components, including chipsets, and creating an enabling environment for the industry to compete globally.

## Promotion of Innovation and R&D

- (xii) Electronics Development Fund (EDF) has been set up as a 'Fund of Funds' to participate in professionally managed  'Daughter  Funds'  which  in  turn  will  provide  risk  capital  to  companies  developing  new technologies  in  the  area  of  electronics,  nano-electronics  and  Information  Technology  (IT).  This  fund  is expected to foster R&D and innovation in these technology sectors. Currently six Daughter Funds are being funded.
- (xiii) Ministry of Electronics and Information Technology (MeitY) provides grant-in-aid support to institutes of higher learning like IITs, IISc, Central Universities and R&D Organizations to conduct research in identified thrust  areas.  These  research  programmes  are  aimed  to  deliver  proof  of  concept,  technology/  product development and transfer of technology.  During  the  last  few  years,  several  research  initiatives  have  been taken in these areas. These research programmes also result in generation of specialized manpower to support 'Make in India'.
- (xiv) Indian Conditional Access System (iCAS) has been developed in Public-Private Partnership (PPP) mode to promote  indigenous  manufacturing  of  Set  Top  Boxes  (STBs).  The  implementation  of  iCAS  in  the  cable networks is underway.
- (xv) An Electropreneur park has been set up in New Delhi for providing incubation for development of ESDM sector which will contribute IP creation and Product Development in the sector.
- (xvi) National Centre of Excellence in Large Area Flexible Electronics (NCFLEX) has been set up in IIT-Kanpur with the objectives to promote R&D; Manufacturing; Ecosystem; Entrepreneurship; International Partnerships and Human Resources and develop prototypes in collaboration with industry for commercialization.
- (xvii) National Centre of Excellence for Technology on Internal Security (NCETIS) has been set up at IIT-Bombay with  the  objective  to  address  the  internal  security  needs  of  the  nation  on  continuous  basis  by  delivering technology prototypes required for internal security and to promote domestic industry in internal security.
- (xviii) Centre for Excellence on Internet of Things (IoT) has been set up in Bengaluru, jointly with NASSCOM.
- (xix) An Incubation centre with focus on medical electronics has been set up at IIT-Patna.
- (xx) A  fabless  chip  design  incubation  centre  has  been  set  up  in  IIT  Hyderabad  to  incubate  start-ups  in semiconductor design and to provide one-stop service to start-ups intending to enter this space.
- (xxi) A    Centre  of  Excellence  (CoE)  on  FinTech  at  STPI  Chennai  has  been  set  up  to  provide  infrastructure, resources, coaching/ mentorship, technology support and funding to emerging start-ups in the FinTech sector through  a  collaborative  approach  including  M/s  intellect  design  as  industrial  partner,  NPCI,  UIDAI  and Partner Banks as Yes Bank, PayPal, HSBC, IIT Chennai as knowledge partner and TiE Chennai to provide industrial connect.
- (xxii) An IoT OpenLab - a Centre of Excellence (CoE) for Internet of Things in partnership with Arrow Electronics at  STPI Bangalore has been set up to provide academic and business mentoring of the startups in the IoT emerging technology area for developing products and/ or services around IoT.
- (xxiii) An ESDM Incubation Centre has been set up at Bhubaneswar with the objective of creating a holistic ecosystem to promote ESDM innovation, R&D and create Indian intellectual property in the eastern region of the country.

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