Lok Sabha Question No. 2795 (UNSTARRED), answered on 2019-07-10
Subject: Incentives for 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. 2795

TO BE ANSWERED ON 10.07.2019

## INCENTIVES FOR ELECTRONICS INDUSTRY

## 2795.    SHRIMATI RITI PATHAK:

Will the Minister of Electronics and Information Technology be pleased to state:

- (a) the  details  of  the  incentives  provided  to  the  electronics  industry  and  the  incentives  proposed  in  the  National Electronics Policy;
- (b) whether the Government proposes to announce any special package to promote the electronics export and remove the hurdles therein; and
- (c) if so, the details thereof and the steps taken by the Government in this regard?

## ANSWER

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

(a):  Steps taken by the Government for promotion of electronics manufacturing and exports in the country including the details of the incentives provided to the electronics industry are listed at Annexure-1. The incentives given under the aegis of National Electronics Policy (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  Electronics  System  Design  and  Manufacturing  (ESDM)  and  create  an enabling environment for the industry to compete globally. The NPE 2019 replaces the NPE 2012. The salient features of NPE 2019 are at Annexure-2 . NPE 2019 is available at the following link: https://meity.gov.in/esdm/policies.

The NPE 2019 when implemented will lead to formulation of several schemes and initiatives, in consultation with the concerned Ministries/ Departments, for the development of ESDM sector in the country.

(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 reimported into India for repairs or for reconditioning.

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Annexure-I

## Steps taken by the Government for promotion of domestic electronics manufacturing 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 (SKD) 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 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

- (xi) 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.
- (xii) 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'.
- (xiii) 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.
- (xiv) 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.
- (xv) National  Centre  of  Excellence  in  Large  Area  Flexible  Electronics  (NCFLEX)  has  been  set  up  in  IITKanpur with the objectives to promote R&D; Manufacturing; Ecosystem; Entrepreneurship; International Partnerships and Human  Resources and develop prototypes in collaboration with industry for commercialization.
- (xvi) National  Centre  of  Excellence  for  Technology  on  Internal  Security  (NCETIS)  has  been  set  up  at  IITBombay 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.
- (xvii) Centre for Excellence on Internet of Things (IoT) has been set up in Bengaluru, jointly with NASSCOM.
- (xviii) An Incubation centre with focus on medical electronics has been set up at IIT-Patna.
- (xix) 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.
- (xx) 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.
- (xxi) 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.
- (xxii) 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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## Salient features of the National Policy on Electronics 2019 (NPE 2019)

The salient features of NPE 2019 inter-alia include:

- (a) Creating eco-system for globally competitive ESDM sector
- (b) Promotion of electronic components manufacturing ecosystem
- (c) Special  package  of  incentives  for  Mega  Projects  which  are  extremely  high-tech  and  entail  huge investments, such as semiconductor facilities (including trusted foundries), display fabrication, photonics and LED chip fabrication units
- (d) Encouraging  Industry-led  R&D  and  innovation  and  promoting  start-up  eco-system  in  all  sub-sectors  of electronics, including emerging technology areas such as 5G, IoT/ Sensors,  Artificial Intelligence (AI), Machine  Learning,  Augmented  Reality  (AR)  and  Virtual  Reality  (VR),  Drones,  Robotics,  Additive Manufacturing, Gaming and Entertainment, Photonics, Nano-based devices, as well as thrust areas such as medical  electronics,  defence  and  strategic  electronics,  automotive  electronics,  cyber  security,  power electronics and automation
- (e) Providing incentives and support for significantly enhancing availability of skilled manpower, including re-skilling, in the ESDM sector
- (f) Promoting  research,  innovation  and  support  to  industry  for  green  processes  and  sustainable  e-Waste management, including inter-alia facilitation  of  citizen  engagement  programmes  for  safe  disposal  of  eWaste in an environment friendly manner, development of e-Waste recycling industry and adoption of best practices in e-Waste management
- (g) Emphasis on Cyber Security and promoting trusted electronics value chain initiatives to improve India's national cyber security profile
- (h) Providing special support for developing core competencies in the following sub-sectors of Electronics:
-  Fabless Chip Design Industry
-  Medical Electronic Devices Industry
-  Automotive Electronics Industry and Power Electronics for Mobility
-  Strategic Electronics Industry
- (i) Creation of Sovereign Patent Fund (SPF) to promote the development and acquisition of IPs in ESDM sector

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## Annexure-II