Lok Sabha Question No. 5 (UNSTARRED), answered on 2022-02-02
Subject: Boost to Electronics manufacturing
Ministry: ELECTRONICS AND INFORMATION TECHNOLOGY
Asked by: Bheemrao Baswanthrao Patil

## GOVERNMENT OF INDIA MINISTRY OF ELECTRONICS AND INFORMATION TECHNOLOGY

## LOK SABHA UNSTARREDQUESTION  NO. 5

TO BE ANSWERED ON:  02.02.2022

## BOOST TO ELECTRONICS MANUFACTURING

## 5.    SHRI B.B.  PATIL:

Will the Minister of ELECTRONICS AND INFORMATION TECHNOLOGY be pleased tostate:

- (a) whether the Government is considering to boost electronics manufacturing in the country and if so, the details thereof;
- (b) whether the Government is preparing a plan to broaden and deepen electronics manufacturing, exports and share in global value chains; and if so, the details thereof;
- (c) whether the role of global value chain is a key factor in the expansion of electronic manufacturing in the country; and
- (d) if so, the steps taken in this regard?

## ANSWER

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

(a): Yes, Sir. Government of India's goal is to make India a significant design and manufacturing hub in the Global Value Chain for Electronics as part of its AtmaNirbhar Bharat economic policies. As part of this, we are broadening and deepening our electronic manufacturing ecosystem. In the post COVID-19 global business and trade environment, there are many changes that represent challenges and opportunities for India. Global companies are looking to diversify their manufacturing locations to mitigate the supply chain risks. At this juncture,  Government  is  engaged  in  positioning  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.

In order to boost electronics manufacturing in the country and incentivize large investments in the electronics value chain as well as promote exports, following Schemes have been notified:

- i. Production Linked Incentive Scheme (PLI) for Large Scale Electronics Manufacturing was notified on 1st April, 2020. PLI Scheme extends an incentive of 6% to 4% on incremental sales (over base year) of goods under target segments that are manufactured in India to eligible companies, for a period of five (5)  years  subsequent to the base  year (FY 2019-20). Incentives are applicable under the scheme from 01.08.2020.

Over the tenure of PLI Scheme, the 16 approved companies are expected to lead to total production of more than  INR 10,50,000 crore (INR 10.5 lakh crore). Out of the total  production  of  INR  10,50,000 crore  in  the  next  5  years,  around  60%  is  expected  to  be  contributed  by  exports  of  the  order  of  INR

6,50,000 crore (INR 6.5 lakh crore). The companies approved under the scheme is expected to bring an additional investment in electronics manufacturing to the tune of INR 11,000 crore.

After  the  success  of  the  First  Round  of  PLI  Scheme  in  attracting  investments  in  mobile  phone  and electronic  components  manufacturing,  Second  Round  of  the  PLI  Scheme  for  Large  Scale  Electronics Manufacturing was launched on 11.03.2021 for incentivising Electronic Components. Under the Second Round, incentives of 5% to 3% have been extended on incremental sales (over base year i.e., FY 201920) of goods manufactured in India and covered under the target segment, to eligible companies, for a period of four (4) years. 16 companies have been approved under the second round of PLI Scheme for Large Scale Electronics Manufacturing.

Over the tenure of Second Round, the 16 approved electronic component manufacturers are expected to generate a total production of upto INR 12,432 crore. The Second Round of the Scheme is expected to bring an additional investment in electronics manufacturing to the tune of INR 573 crore.

In accordance with the announcement made by Hon'ble Union Finance & Corporate Affairs Minister on 28.06.2021 to provide relief to companies approved under the PLI Scheme affected by the COVID-19 pandemic, the tenure of the PLI Scheme for Large Scale Electronics Manufacturing has been extended by one year i.e., from 2024-25 to 2025-26. The notification in this regard was issued on 23.09.2021.

- ii. Production Linked Incentive Scheme (PLI) for IT Hardware was notified on 3rd March, 2021. The PLI Scheme extends an incentive of 4% to 2% / 1% on net incremental sales (over base year i.e., FY 2019-20)  of  goods  under  target  segments  that  are  manufactured  in  India  to  eligible  companies,  for  a period of four years (FY 2021-22 to FY 2024-25). The target IT hardware segments under the Scheme include Laptops, Tablets, All-in-One Personal Computers (PCs) and Servers. Incentives are applicable under the Scheme from 01.04.2021. 14 companies have been  approved under the PLI Scheme for IT Hardware.

Over the tenure of Scheme, the 14 approved companies under the Scheme are expected to lead to total production of about INR 1,60,000 crore. Out of the total production of INR 1,60,000 crore in the next 4 years, more than 37% is expected to be contributed by exports of the order of INR 60,000 crore. The scheme is expected to bring an additional investment in electronics manufacturing to the tune of INR 2,500 crore.

- iii. Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS) was notified on 1st April 01, 2020. The SPECS Scheme 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. Under the Scheme, 20 applications have  been  recommended  for  approval  with  total  project  outlay  of  INR  6,976  crore  and  committed incentives  of  INR  1,236  crore,  with  total  employment  generation  potential  of  28,845.  The  Scheme  is open  to  receive  applications  till  31.03.2023.  Over  the  tenure  of  SPECS  Scheme,  the  expected  new investment in Electronic Components and sub-assemblies is INR 20,000 crore. The total employment potential  of  the  scheme  is  approximately  6,00,000  (1,50,000  direct  employment  and  4,50,000  indirect employment).
- iv. Modified Electronics Manufacturing Clusters (EMC 2.0) Scheme was  notified  on  1st  April,  2020. The EMC 2.0 Scheme 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 their production facility in the country. The Scheme provides financial assistance for setting up of both EMC projects as well  as  Common  Facility  Centres  (CFCs)  through  Project  Implementing  Agency  such  as  State Government or their agency, Central Public Sector Units (CPSUs) / State Public Sector Units (SPSUs), Industrial Corridor Development Corporations (ICDCs) or Joint Venture of such agencies with Anchor unit(s)  or  industrial  park  developers. Under  the  scheme  2  applications  for  setting  up  of  EMC  with  a project cost of INR 1410.84 crore including Central financial assistance of INR 681.08 crore have been approved. These EMCs are poised to attract an investment of INR 18,910 crore and have potential to generate  44,560  employment  opportunities  after  getting  operational.  The  financial  assistance  of  INR 205.76 crore has been released so far.
- v. Modified Special Incentive Package Scheme (MSIPS)In order to promote large scale manufacturing in the country, MSIPS was announced by the Government in July 2012. It has been amended twice - in August, 2015 and in January, 2017, and mainly provide Capex subsidy of 20-25%. It has been closed on 31 st December,  2018  to  receive  new  applications.  321  applications  with  proposed  investment  of  INR 90,746  crore  are  under  consideration.  Out  of  these,  310  applications  with  proposed  investment  of approximately  INR  84,552  crore  have  been  approved,  07  applications  with  proposed  investment  of approximately INR 3,188 crore have been recommended by the Appraisal Committee for approval and 4 applications with proposed investment of INR 3,006 crore are under appraisal process. The incentives to the tune of INR 1374 crore have been disbursed to the 99 applicants.
- vi. 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  15.12.202  for  the  development  of  robust  and  sustainable  Semiconductor  and Display ecosystem in the country whereby the following schemes were introduced:
5.  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.
6.  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.
7.  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.
8.  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.

(b):  Yes.  Government  of  India  is  working  on  a  1,000-day  plan  to  broaden  and  deepen  electronics manufacturing,  exports  and  share  in  global  value  chains.  In  this  regard,  Ministry  of  Electronics  and Information  Technology  (MeitY)  has  worked  with  electronics  industry  associations  to  release  a  vision document titled 'Increasing India's Electronics Exports and Share in GVCs - towards an Atmanirbhar Bharat'. This document focuses on the opportunities to increase India's share in Global Value Chains and build large scale electronics manufacturing capabilities, with emphasis on increasing scale, competitiveness and domestic value  addition.  The  second  volume  of  vision  document  is  titled  'USD  300  Bn  Sustainable  Electronics Manufacturing & Exports By 2026: Roadmap and Strategies'. This document focuses on the strategies/recommendations to bolster India's capabilities to attract electronics global value chains across 11 electronics product segments (including electronics component ecosystem) under the electronics manufacturing target of USD 300 Bn by 2025-26.

(c) and (d): Yes, Sir. Government of India recognises the role of global value chains in expanding electronic manufacturing in the country. A number of activities have been undertaken for engaging and attracting the global value chains in order to increase the domestic value addition. Series of supply chain meets have been organized in association with major electronics manufacturers in order to bring their vendors. In addition, a series of webinars, conferences, meetings were also organised in coordination with Indian Embassies overseas, foreign  Embassies  in  India,  Industry  Associations,  Local  Industry,  Consulting  companies,  Banks  etc.  for creating awareness of various schemes of MeitY and other Ease of Doing Business (EoDB) initiatives of the Government to attract the global value chains of electronics manufacturers to India. The steps taken by the Government for the expansion of electronic manufacturing in the country are at Annexure .

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## Annexure

Steps taken by the Government for the expansion of electronics manufacturing in the country:

1. National  Policy  on  Electronics  2019: 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.
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  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 3,762 crore including Government Grant-in-Aid of INR 1,538 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. INR 409 crore has been committed through EDF to 9 Daughter Funds with a targeted corpus of INR 2,626 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.60/2018-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.
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
11. Control  /  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 is applicable on 63 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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