Lok Sabha Question No. 4410 (UNSTARRED), answered on 2022-03-30
Subject: Electronic Hardware Manufacturing Sector
Ministry: ELECTRONICS AND INFORMATION TECHNOLOGY
Asked by: Gowdar Mallikarjunappa Siddeshwara

## GOVERNMENT OF INDIA MINISTRY OF ELECTRONICS AND INFORMATION TECHNOLOGY

## LOK SABHA

## UNSTARRED QUESTION NO. 4410

TO BE ANSWERED ON 30.03.2022

## ELECTRONIC HARDWARE MANUFACTURING SECTOR

## 4410       SHRI  G.M. SIDDESHWAR:

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

- (a) whether the Government has identified major impediments faced by the electronics hardware manufacturing sector in the country;
- (b) if so, the details thereof;
- (c) whether the Government has taken any steps to remove impediments; and
- (d) if so, the details thereof and if not, the reasons therefor?

## ANSWER

## MINISTER OF STATE FOR ELECTRONICS AND INFORMATION TECHNOLOGY (SHRI RAJEEV CHANDRASEKHAR)

- (a) and (b): Government of India's goal is to make India a significant design and manufacturing hub by broadening and deepening our electronic manufacturing ecosystem. The major impediments faced by the electronics hardware manufacturing sector in the country are as under:
- (i)  Information Technology Agreement and FTAs: Electronics was the first sector to be opened up and which accepted zero duty regime for large number of products. As a signatory to the Information Technology  Agreement  (ITA-1)  of  the  World  Trade  Organization  (WTO),  India  has  implemented zero  duty  regime  on  217  tariff  lines.  Under  the  Free  Trade  Agreements  (FTAs),  the  import  of electronics hardware from the FTA countries such as ASEAN, Korea and Japan is allowed at a duty which is lower than the normal duty rate. Thus, there is limited protection to the electronics industry in the country.
- (ii)  Disability costs in domestic manufacturing: The electronics manufacturing sector faces several disabilities which render domestic manufacturing less competitive vis-a-viz other countries. The three factors  which  pose  challenges  to  Indian  manufacturers  are  infrastructure,  power,  and  finance. Infrastructure challenges arise from poor supply chain logistics and inadequate ready availability of land. Finance costs in India are typically 5 to 6 percentage points above international rates. Power supply has improved much in the few years but it still remains unreliable and costly in many parts of the country.
- (iii)  Diversity and velocity of technology change: Electronics is pervasive and permeates all sectors of the economy. Therefore, the development of the sector involves domain knowledge of each of the sectors which it serves. The technologies in the electronics sector changes rapidly and currently it is estimated  to  be  even  less  than  six  months  in  certain  verticals.  Convergence  between  different technologies, devices, software, and hardware are also driving technology changes.
- (c) and (d): Steps taken by the Government to make India a significant design and manufacturing hub by broadening and deepening our electronic manufacturing ecosystem, are annexed

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## Annexure

## Steps taken by the Government to promote the electronics hardware manufacturing sector in the country

1. National Policy on Electronics 2019 : The National Policy on Electronics 2019 (NPE 2019) has been notified by Ministry of Electronics and Information Technology (MeitY). 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.

To attract and incentivize large investments in the electronics value chain and promote exports, following Schemes have been notified:

- (i) Production Linked Incentive Scheme (PLI)for Large Scale Electronics Manufacturing notified  vide  Gazette  Notification  No.CG-DL-E-01042020-218990  dated  April  01,  2020 provides an incentive of 4% to 6% to eligible companies on net incremental sales (over base year)  involved  in  mobile  phone  manufacturing  and  manufacturing  of  specified  electronic components,  including  Assembly,  Testing,  Marking  and  Packaging  (ATMP)  units,  for  a period of five (5) years.
- (ii) Production  Linked  Incentive  Scheme  (PLI)  for  IT  Hardware notified  vide  Gazette Notification No.CG-DL-E-03032021-225613 dated March 03, 2021 provides an incentive of 4% to 2% / 1% on net incremental sales (over base year) of goods manufactured in India and covered under the target segment, to eligible companies, for a period of four (4) years. The Target Segments under PLI Scheme include (i) Laptops (ii) Tablets (iii) All-in-One PCs and (iv) Servers.
- (iii) Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors  (SPECS) notified  vide  Gazette  Notification  No.CG-DL-E-01042020218992 dated April 01, 2020 provides financial incentive of 25% on capital expenditure for the  identified  list  of  electronic  goods  that  comprise  downstream  value  chain  of  electronic products, i.e., electronic components, semiconductor / display fabrication units, ATMP units, specialized sub-assemblies and capital goods for manufacture of aforesaid goods.
- (iv) Modified Electronics Manufacturing Clusters (EMC 2.0) Scheme notified vide Gazette Notification  No.CG-DL-E-01042020-218991  dated  April  01,  2020  provides  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 chain to set up units in the country. The Scheme  provides  financial  assistance  for  setting  up  of  both  EMC  projects  and  Common Facility Centres (CFCs) across the country.
- (v) Semiconductor  and  Display  Manufacturing  Schemes: The  Union  Cabinet  chaired  by Hon'ble Prime Minister Shri Narendra Modi approved the comprehensive program with an outlay of INR 76,000 crore (> USD 10 billion) on 15.12.2021 for the development of robust and sustainable Semiconductor and Display ecosystem in the country whereby the following schemes were introduced:
-  Semiconductor  &  Display  Fabs scheme  extends  fiscal  support  for  setting  up Semiconductor  &  display  Fab  which  is  aimed  at  attracting  large  investments  for setting  up  semiconductor  wafer  fabrication  facilities  and  display  panels  in  the country, and thus helping in the establishment of a trusted value chain.
-  Compound Semiconductors / Silicon Photonics / Sensors Fab and Semiconductor  Assembly,  Testing,  Marking  and  Packaging  (ATMP)  /  OSAT Facilities  Scheme extends  fiscal support of 30%  of  the  Capital  Expenditure investment for setting up of the said facilities.
-  Design  Linked  Incentive  Scheme offers  financial  incentives,  design  infrastructure support  across  various  stages  of  development  and  deployment  of  semiconductor design for Integrated Circuits (ICs), Chipsets, System on Chips (SoCs), Systems & IP Cores and semiconductor linked design.
-  Approval was granted for the setting up of India Semiconductor Mission (ISM) as an Independent Business Division within Digital India Corporation having administrative  and  financial  autonomy  to  drive  India's  strategies  for  developing semiconductors and display manufacturing ecosystem. Envisioned to be led by global experts in the Semiconductor and Display industry, the ISM will serve as the nodal agency  for  efficient,  coherent  and  smooth  implementation  of  the  schemes  centred around Semiconductors and Display ecosystem, in consultation with the Government ministries/departments/agencies, industry, and academia.
2. 100% FDI: As  per  extant  Foreign  Direct  Investment  (FDI)  policy,  FDI  up-to  100%  under  the automatic  route  is  permitted  for  electronics  manufacturing  (except  from  countries  sharing  land border with India), subject to applicable laws / regulations; security and other conditions.
3. Electronics  Manufacturing  Clusters  (EMC)  Scheme: Electronics Manufacturing  Clusters (EMC) Scheme: Electronics Manufacturing Clusters Scheme was notified on 22nd October, 2012 to  provide  support  for  creation  of  world-class  infrastructure  along  with  common  facilities  and amenities  for  attracting  investment.  Under  the  Scheme,  19  Greenfield  EMCs  and  3  Common

Facility  Centres  (CFCs)  measuring an area of 3,464 acres with total project cost of  INR 3,732 crore including Government Grant-in-Aid of INR 1,529 crore have been approved.

4. Electronics Development Fund (EDF): 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  startups  and  companies  developing  new  technologies  in  the  area  of electronics and Information Technology (IT). This fund is expected to foster R&D and innovation in  these  technology  sectors.  EDF  is  expected  to  invest  in  8  Daughter  Funds.  The  total  targeted corpus of these 8 Daughter Funds was Rs. 2,176 crore and the amount committed by EDF to these 8 Daughter Funds was Rs. 271.30 crore.
5. Phased  Manufacturing  Programme  (PMP) has  been  notified  to  promote  domestic  value addition in mobile phones and their sub-assemblies / parts manufacturing. As a result, India has rapidly  started  attracting  investments  into  this  sector  and  significant  manufacturing  capacities have been set up in the country. The manufacturing of mobile phones has been steadily moving from  Semi  Knocked  Down  (SKD)  to  Completely  Knocked  Down  (CKD)  level,  thereby progressively increasing the domestic value addition.
6. Tariff Structure has been rationalized to promote domestic manufacturing of electronic goods, including, inter-alia, Cellular mobile phones, Televisions, Electronic components, Set Top Boxes for TV, LED products and Medical electronics equipment.
7. Exemption from Basic Customs Duty on capital goods: Notified capital goods for manufacture of specified electronic goods are permitted for import at 'NIL' Basic Customs Duty.
8. Simplified  import  of  used  plant  and  machinery: 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.
9. Relaxing  the  ageing  restriction: The  Department  of  Revenue  vide  Notification  No.60/2018Customs 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.
10. 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, the Government has issued Public Procurement (Preference to Make in India) Order 2017 vide the Department for Promotion of Industry and Internal Trade (DPIIT)  Order  dated  15.06.2017  and  subsequent  revisions  vide  Orders  dated  28.05.2018, 29.05.2019, 04.06.2020 and 16.09.2020. In furtherance of the aforesaid Order, MeitY has notified mechanism for calculating local content for 13 Electronic Products viz., (i) Desktop PCs, (ii) Thin Clients, (iii) Computer Monitors, (iv) Laptop PCs, (v) Tablet PCs, (vi) Dot Matrix Printers, (vii) Contact  and  Contactless  Smart  Cards,  (viii)  LED  Products,  (ix)  Biometric  Access  Control  /
8. Authentication  Devices,  (x)  Biometric  Finger  Print  Sensors,  (xi)  Biometric  Iris  Sensors,  (xii) Servers, and (xiii) Cellular Mobile Phones, for procurement to be made from local suppliers.
11. Compulsory  Registration  Order  (CRO): MeitY  has  notified  'Electronics  and  Information Technology  Goods  (Requirement  of  Compulsory  Registration)  Order,  2012'  for  mandatory compliance  to  ensure  safety  of  Indian  citizens  by  curbing  import  of  substandard  and  unsafe electronic  goods  into  India.  63  Product  Categories  have  been  notified  under  the  CRO  and  the order has come into effect for all  the notified product categories.
12. Establishment  of  Gallium  Nitride  (GaN)  Ecosystem  Enabling  Centre  and  Incubator: The project for 'Establishment of Gallium Nitride (GaN) Ecosystem Enabling Centre and Incubator for  High  Power  and  High  Frequency  Electronics'  has  been  approved.  The  project  is  being implemented by Society  for  Innovation  and  Development  (SID),  Centre  for  Nano  Science  and Engineering (CeNSE), IISc Bengaluru.

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