Lok Sabha Question No. 2741 (UNSTARRED), answered on 2024-12-11
Subject: Encouraging FDI in Electronic Manufacturing Sector
Ministry: ELECTRONICS AND INFORMATION TECHNOLOGY
Asked by: Smt. Sajda Ahmed

## GOVERNMENT OF INDIA MINISTRY OF ELECTRONICS AND INFORMATION TECHNOLOGY

## LOK SABHA UNSTARRED  QUESTION NO. 2741

TO BE ANSWERED ON 11.12.2024

## ENCOURAGING FDI IN ELECTRONIC MANUFACTURING SECTOR

## 2741.    SMT. SAJDA AHMED:

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

- (a) the details of the reforms made to improve the regulatory environment for electronic manufacturing in the country;
- (b)  whether  the  Government  assesses  or  has  assessed  the  opportunities  emerging  for  electronic manufacturing across the country particularly in West Bengal and if so, the details thereof;
- (c)  the  details  of  foreign  investors  or  companies  which  have  entered  or  proposed  to  enter  the  Indian market;
- (d) the steps taken by the Government to encourage foreign investment in the electronic manufacturing sector; and
- (e) the estimated job creation possibilities through these investments and reforms?

## ANSWER

## MINISTER OF STATE FOR ELECTRONICS AND INFORMATION TECHNOLOGY (SHRI JITIN PRASADA)

- (a)  to  (e):    To  attract  and  incentivize  large  investments  in  the  electronics  value  chain  and  promote exports, following schemes and interventions have been made:
- (i) Production  Linked  Incentive  (PLI)  Scheme  for  Large  Scale  Electronics : So  far,  incremental investment of Rs 9,349 Crores had been made under this PLI scheme. This has led to production of more than Rs 6 Lakh Crores.
- (ii) PLI  scheme  for  IT  hardware:  So  far,  incremental  investment  of  Rs  501  Crores  has  been  made under this PLI scheme. This has led to production of more than Rs 10,245 Crores.
- (iii) Government has approved Semicon India programme with a total outlay of Rs 76,000 crore for the development  of  semiconductor  and  display  manufacturing  ecosystem  in  the  country.  Following four schemes have been introduced under the aforesaid programme:
- a. 'Modified Scheme for setting up of Semiconductor Fabs in India' extends a fiscal support of 50%  of  the  project  cost  on pari-passu basis  for  setting  up  of  Silicon  CMOS  based Semiconductor Fabs in India.
- b. 'Modified Scheme for setting up of Display Fabs in India' extends fiscal support of 50% of Project Cost on pari-passu basis for setting up of Display Fabs in India.
- c. 'Modified Scheme for setting up of Compound Semiconductors / Silicon Photonics / Sensors Fab  /  Discrete  Semiconductors  Fab  and  Semiconductor  Assembly,  Testing,  Marking  and Packaging (ATMP) / OSAT facilities in India' extends a fiscal support of 50% of the Capital Expenditure  on pari-passu basis  for  setting  up  of  Compound  Semiconductors  /  Silicon Photonics  (SiPh)  /  Sensors  (including  MEMS)  Fab/  Discrete  Semiconductor  Fab  and Semiconductor ATMP / OSAT facilities in India.
- d. 'Design Linked Incentive (DLI) Scheme':  In addition to the design infrastructure support, the  scheme  provides  'Product  Design  Linked  Incentive'  of  up  to  50%  of  the  eligible expenditure  subject  to  a  ceiling  of  ₹15  Crore  per  application  and  'Deployment  Linked Incentive' of 6% to 4% of net sales turnover over 5 years subject to a ceiling of ₹30 Crore per application.

Government has also approved modernisation of Semi-Conductor Laboratory, Mohali. Besides, MoU for  cooperation  in  development  of  semiconductor ecosystem have been signed with Singapore, USA, European Union and Japan.

Applied Materials has set up a collaborative engineering centre in Bengaluru with an investment of 400 million dollars over 4 years. This engineering centre is focused on development and commercialisation of  technologies  for  semiconductor  manufacturing  equipment.AMD  has  established  its  largest  global design center, AMD Technostar, in Bengaluru. This centre is focused on the design and development of semiconductor technology including 3D stacking, artificial intelligence, and machine learning.

India is well on its path to create a robust semiconductor ecosystem in the country.4 semiconductor units with cumulative investment of Rs 1,48,746 Cr have been approved under the Semicon India Programme. Construction on these units is going on at a rapid pace.

15 semiconductor design companies are being supported under the Design Linked Incentive Scheme. Additionally,  41  semiconductor  design  companies  have  been  approved  for  access  of  the  EDA  tools made available by National EDA Tool Grid setup at ChipIN Centre at C-DAC Bengaluru.

As a result of these initiatives, the domestic production of the electronics has grown from INR 5,33,550 Crores  in  FY  2019-20  to  INR  9,52,200  Crores  in  FY2023-24  with  compound  annual  growth  rate ('CAGR')  of  about  16%.  As  per  industry  estimates,  approximately  25  lakhs  employment  (direct  and indirect) has been generated in the electronics sector.

Since April 2019, India has received FDI amounting to about USD 3,290 million (about 28 thousand Crore  Rupees)  from  356  companies  in  electronics  sector.  The  year  wise  FDI  received  in  electronics sector is as follows:

| FY                      | Investment(in USD Mn)   |
|-------------------------|-------------------------|
| 2019-20                 | 422.37                  |
| 2020-21                 | 375.31                  |
| 2021-22                 | 416.99                  |
| 2022-23                 | 539.96                  |
| 2023-24                 | 695.75                  |
| 2024-25 (till Q2)       | 839.57                  |
| Total                   | 3289.94                 |
| Source: FDI Cell, DPIIT | Source: FDI Cell, DPIIT |

Opportunities in electronic manufacturing are pan-India opportunities. Many states have developed their own policies on electronics manufacturing to develop electronics manufacturing ecosystem within the region, complementing national policies in the process. Therefore, any state/UT, including West Bengal, may capitalise on the opportunity to develop electronics manufacturing ecosystem in the state.

The  following  reforms  have  been  taken  to  improve  the  regulatory  environment  for  electronic manufacturing in the country:

- (i) Compulsory  Registration  Order  for  greater  flexibility  in  certification: To  ensure  that  the electronic product manufactured in the country conform to the safety standards, the government has notified electronic products under the schedule of Electronics and Information Technology Goods  (Requirement  of  Compulsory  Registration)  Order,  2021  as  per  the  scheme  -II  of BIS conformity Assessment Regulation, 2018 under BIS Act 2016. The details are available on MeitY's website (http://meity.gov.in/esdm/standards).
- (ii) Phased Manufacturing Programme (PMP): PMP has been notified to promote domestic value addition  in  Cellular  Mobile  handsets,  Wrist  Wearable  Devices  (commonly  known  as  smart watches), and Hearable Devices and sub-assemblies / inputs / parts / sub-parts thereof.
- (iii) Purchase  Procurement  Order  (PPO): Public  Procurement  Order  prioritizes  domestically manufactured  products  in  public  procurement  to  enhance  domestic  industry  capabilities  by progressively increasing local value addition, contributing to the broader goal of self-reliance.
- (iv) Amendment in  Import  Policy  to  discontinue  compulsory  registration  on  CHIMs  Portal: DGFT  vide  notification 41/2024-25  dated 29.11.2024 has discontinued  the  Compulsory Registration  under  Chip  Import  Monitoring  System  (CHIMs)  for  ITC  HS  Codes  85423100, 85423900, 85423200, 85429000 and 85423300 for import of semiconductor chips covered under Chapter  85  of  ITC  (HS),  2022,  Schedule-1(Import  Policy).  It  shall  enhance  ease  of  doing business for the electronics and semiconductor ecosystem.
- (v) 100% Foreign Direct Investment (FDI) : As per extant 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. The FDI  approval  to  land  border  sharing  countries  are  being  facilitated  through  the  Press  Note  3 (PN3) notification.
- (vi) Simplifying  the  Visa  Issuance  process  for  PLI  sector: The  government  has  revised  and expanded  the  issuance  of  PLI  business  visa  for  electronic  manufacturing  from  PLI  approved companies to any company falling under the PLI sector. Further, the process to apply for a PLI business visa has been made completely online.
- (vii) Clarification on Import of Goods at Concessional Rate (IGCR) across the electronics value chain  and  MOOWR  units: CBIC  vide  Circular  No.  26/2024-Customs  dated  21.11.2024 clarified  that  the  goods  being  imported  by  the  intermediate  goods  manufacturer  which  is MOOWR  unit  for  further  supplying  after  some  manufacturing/  value  addition  to  the  final manufacturer of Cellular mobile phones are duly eligible for the benefit of concessional rate of duty under IGCR Rules, 2022, as long as all other conditions are met. Further, it is also clarified that the MOOWR  unit  may  now  avail IGCR  exemption along with duty deferment simultaneously,  provided  that  it  complies  with  the  conditions  prescribed  in  IGCR  Rules  and MOOWR provisions.
- (viii) Clarification on movement of goods from section 65 unit to another warehouse/section 65 unit: CBIC  vide  instruction  no.  16/2024-  Customs  dated  25.06.  2024  has  clarified  that  the transfer of resultant goods from section 65 unit to another warehouse/section 65 unit is permitted subject to compliance of the conditions prescribed under MOOWR.
- (ix) Amendment to support manufacturing of hearing and wearable: CBIC vide notification no. 33/2023-Customs dated 27.04.2023 amended PMP notification of hearing and wearable stating that the provision of rule 2 (a) of the General Rules of Interpretation of the First Schedule of the Customs Tariff Act, 1975 shall not be applicable to the import of components/inputs/parts/subparts even when such goods are presented together.
- (x) Rationalisation of Tariff Structure: 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.
- (xi) Exemption of Basic Customs Duty on capital goods : Notified capital goods for manufacture of specified electronic goods are permitted for import at 'NIL' Basic Customs Dut
- (xii) 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 Trans boundary Movement) Rules, 2016, vide Ministry of Environment, Forest and Climate Change Notification dated 11.06.2018.

********