Lok Sabha Question No. 3887 (UNSTARRED), answered on 2024-12-18
Subject: Assistance to Indigenous Electronic Industry
Ministry: ELECTRONICS AND INFORMATION TECHNOLOGY
Asked by: Dr. Shivaji Bandappa Kalge

## GOVERNMENT OF INDIA MINISTRY OF ELECTRONICS AND INFORMATION TECHNOLOGY

## LOK SABHA

## UNSTARRED QUESTION NO. 3887

TO BE ANSWERED ON 18.12.2024

## ASSISTANCE TO INDIGENOUS ELECTRONIC INDUSTRY

## 3887.        DR. SHIVAJI BANDAPPA KALGE:

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

- (a) whether the Government proposes the indigenous electronic industry to grow as  the  leading  manufacturer  of  electronic  goods  to  attract  not  only  developing countries but also developed countries;
- (b) if so, the shortcomings identified by the Government which deter the country to achieve the desired status;
- (c) the  corrective  measures  taken/proposed  to  be  taken  by  the  Government  to achieve the goal; and
- (d) the  manner in which the Government would extend help and assistance to the industry players to grow as per the expectations?

## ANSWER

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

(a) to  (d):      Government  of  India  is  actively  promoting  the  growth  of  the indigenous electronics industry with the aim to broaden and deepen the country's electronic  manufacturing  ecosystem  as  well  as  increase  India's  participation  in electronics  Global  Value  Chains  (GVCs).  As  a  result  of  which  electronics production has grown from INR 1,90,366 crores in FY 2014-15 to INR 9,52,000 crores in FY 2023-24 with compound annual growth rate ('CAGR') of more than 17%. India has now reached a stage where 99.2% of mobile handsets being used in  India  are  domestically  manufactured.  Also,  India  has  become  a  mobile exporting country as compared to mobile importing country in FY 2014-15 when almost 74% of all mobile phones sold in India were imported. As per industry estimates,  approximately  25  lakhs  employment  (direct  and  indirect)  has  been generated in the electronics sector.

India's  electronics  manufacturing  faces  a  cost  disability  vis-à-vis  competing nations due to several factors which, inter-alia , include higher capex requirement, higher gestation period, scale of production, technology transfer and competing with the global players on quality as well as price.

As  a corrective measure  to enable Indian companies  to overcome  these disabilities Government of India has taken several initiatives to enhance domestic capabilities,  reduce  import  dependence  and  position  India  as  a  global  hub  for electronics production. The initiatives are detailed in Annexure I.

********

## Initiatives taken to boost electronics manufacturing

## 1. Programme for Development of Semiconductors and Display Manufacturing Ecosystem in India (Semicon India Programme):

Government  has  approved  the  Semicon  India  programme  with  a  total  outlay  of INR 76,000 crore for the development of semiconductor and display manufacturing  ecosystem  in  the  country.  The  programme  has  further  been modified in view of the aggressive incentives offered by countries already having established  semiconductor  ecosystem  and  limited  number  of  companies  owning the advanced node technologies. The programme aims to provide financial support to  companies  investing  in  semiconductors,  display  manufacturing  and  design ecosystem.  This  will  serve  to  pave  the  way  for  India's  growing  presence  in  the global electronics value chains.

Following four schemes have been introduced under the aforesaid programme:

- i. ' Scheme  for  setting  up  of  Semiconductor  Fabs  in  India '  for  attracting large investments for setting up semiconductor wafer fabrication facilities in the country to strengthen the electronics manufacturing ecosystem and help establish a trusted value chain. The Scheme extends a fiscal support of 50% of the project cost on pari-passu basis for setting up of Silicon CMOS based Semiconductor Fab in India.
- ii. ' Scheme  for  setting  up  of  Display  Fabs  in  India '  for  attracting  large investments for manufacturing TFT LCD or AMOLED based display panels in  the  country  to  strengthen  the  electronics  manufacturing  ecosystem. Scheme extends fiscal support of  50% of Project Cost on pari-passu basis for setting up of Display Fabs in India.
- iii. ' 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' shall  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.
- iv. 'Design Linked Incentive (DLI) 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.  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.

In addition to the above schemes, Government has also approved modernisation of Semi-Conductor Laboratory, Mohali as a brownfield Fab.

2. Production  Linked  Incentive  Scheme  (PLI)  for  Large  Scale  Electronics Manufacturing was notified on April 01, 2020 to provide an incentive of 4% to 6% to eligible companies on incremental sales (over base year) involved in mobile phone  manufacturing  and  manufacturing  of  specified  electronic  components, including Assembly, Testing, Marking and Packaging (ATMP) units. 16 applications have been approved under the scheme. ( 5 under Global Champions Category,  5  under  Indian  Champions  Category  and  6  companies  under Electronic Components category )

After the success of the First Round of Production Linked Incentive Scheme, under second round 16 companies were approved to provide incentives of 5% to 3% on incremental sales of  goods  manufactured in India and covered under the target segment, to eligible companies, for a period of four (4) years.

Scheme  has  attracted  investment  of  INR  9,349  Crore  and  generated  direct employment to 1,28,688 persons. Production under scheme is INR 6,14,115 Crore till oct 2024.

3. Production Linked Incentive Scheme (PLI) for IT Hardware was notified on March 03, 2021 to provide 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) year. The Target Segment under PLI Scheme includes (i) Laptops (ii) Tablets (iii) All-in-One PCs and (iv) Servers.

Further Production Linked Incentive Scheme (PLI) for IT Hardware 2.0 was notified  on  May  29,  2023  with  a  budgetary  outlay  of  17,000  crore  provides  an average incentive of around 5% on net incremental sales (over base year) of target segment  products  for  a  period  of  6  years.  The  target  segment  products  include: Laptops, Tablets, All-in-One PCs, Servers and Ultra Small Form Factor.

Scheme has attracted investment of INR  501  Crore and generated direct employment to 4, persons. Production under scheme is INR 10,245 Crore till Oct 2024.

4. Scheme  for  Promotion  of  Manufacturing  of  Electronic  Components  and Semiconductors  (SPECS) was  notified  on  April  01,  2020  to  provide  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. The scheme has been closed to receive new applications on 31.03.2024 and is in implementation mode.

Scheme has attracted investment of INR  9,168 Crore and has generated employment to 38,769 persons. Production under scheme is INR 24,050 Crore till Nov 2024.

5. Modified Electronics Manufacturing Clusters (EMC 2.0) Scheme was notified on April01, 2020 to provide 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.

Scheme  has  attracted  investment  of  INR  8,490  Crore  and  generated  direct employment to 8,950 persons till oct 2024.

6. Modified  Special  Incentive  Package  Scheme  (M-SIPS) :  The  Scheme  was notified on 27 th July, 2012 to provide financial incentives to offset disability and attract  investments  in  the  electronics  manufacturing  sector.  It  was  amended  in August, 2015 to extend the period of the scheme, enhance scope of the Scheme by including 15 more product verticals, and attract more investment. The scheme was further  amended  in  January,  2017  to  expedite  the  investments.  The  scheme provides  subsidy  for  capital  expenditure  -  20%  for  investments  in  Special Economic Zones (SEZs) and 25% in non-SEZs. The incentives are available for 44 categories  /  verticals  of  electronic  products  and  components  covering  entire electronics  manufacturing  value  chain.  The  Scheme  was  open  to  receive  new applications till 31.12.2018 and is in the implementation mode.

Scheme  has  attracted  investment  of  INR  45,095  Crore  and  generated  direct employment  to  1,71,499  persons.  Production  under  scheme  is  INR  13,35,035 Crore till Oct 2024.

7. 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.

Scheme  has  attracted  investment  of  INR  17,198  Crore  and  generated  direct employment to 67,905 persons till Oct 2024.

8. 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 sector. As on 31.10.2024, EDF has invested Rs. 257.58 crore in eight Daughter  Funds,  which  in  turn  have  made  investments  of  1335.26  crore  in  128 Ventures/Startups. Total employment in supported Startups was more than 23,000. The number of IPs created/acquired by the supported start-ups is 346.
9. 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.
10. 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 .
11. Tariff  Structure has  been  rationalized  to  promote  domestic  manufacturing  of electronic goods, inter-alia , including, Cellular mobile  phones, Televisions, Electronic components, Set Top Boxes for TV and LED products
12. 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.
13. 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.
14. Relaxing  the  ageing  restriction :  The  Department  of  Revenue  vide  Notification No.60/2018-Customs dated 11.09.2018 has amended the Notification No.158/95Customs 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.
15. 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, 16.09.2020 and 19.07.2024. In furtherance of the aforesaid Order, MeitY has notified mechanism for calculating local content for 14 Electronic  Products  viz.,  (i)  Desktop  PCs,  (ii)  Thin  Clients,  (iii)  Computer Monitors, (iv) Laptop PCs, (v) Tablet PCs, (vi) Dot Matrix Printers, (vii) Contact
9. and Contactless Smart Cards, (viii) LED Products, (ix) Biometric Access Control / Authentication  Devices,  (x)  Biometric  Finger  Print  Sensors,  (xi)  Biometric  Iris Sensors, (xii) Servers, (xiii) Cellular Mobile Phones,(xiv) CCTV/VSS Systems for

procurement to be made from local supplier. :  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 India.  64  Product Categories  have  been  notified  under  the  CRO  and  the  order  is  applicable  on  63

16. Compulsory  Registration  Order  (CRO) import of substandard  and  unsafe electronic goods  into product categories.

********