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MEITY launched 3 new schemes worth Rs 50,000 cr to boost electronic manufacturing in India

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Centre launches schemes to boost electronic manufacturingOn June 2, 2020, Minister of Electronics and Information Technology (MEITY) Ravi Shankar Prasad launched a trilogy (group of three) of schemes namely “Electronics Manufacturing Scheme 2.0” with an outlay of Rs 50,000 crore (approximately $7 billion) to boost electronic manufacturing in India. These will contribute in achieving a USD 1 Trillion digital economy and a USD 5 Trillion GDP by 2025. The three schemes are:

  1. Production Linked Incentive Scheme (PLI) for Large Scale Electronics Manufacturing,
  2. Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS) 
  3. Modified Electronics Manufacturing Clusters (EMC 2.0) Scheme

The above schemes were already approved by the Union Cabinet in March, 2020 but were launched formally on June 2, 2020. With the three new schemes, the government aims to manufacture electronics worth Rs 8 trillion.  

Target – The government aims to increase the domestic value addition for mobile phones by 35-40 per cent by 2025.

Let’s discuss about the schemes in detail:

About PLI scheme:

Instituted for mobile phones, the PLI scheme has taken the maximum portion of total outlay at approximately Rs. 41,000 crore. It offers an incentive of 4-6% over a period of 5 years for manufacturing in India. The application dates are open from June 2 to July 31st.

  • This scheme will help boost growth in mobile phone manufacturing in India as well as meet exports targets assigned under the National Policy on Electronics (NPE 2019).

Background:

The manufacturing of mobile handsets, which has been a top priority of the government, was a focus area of the NPE 2019 with a target of producing 1 billion mobile handsets by 2025, valued at $190 billion, including 600 million mobile handsets for export.

India’s growth in mobile manufacturing:

-India’s production of electronics grew from $29 billion in 2014 to $70 billion in 2019.

-From just two mobile phone factories in 2014, India now has become the second largest mobile phone producer in the world.

-Production of mobile handsets in 2018-19 reached 29 crore units worth Rs 1.70 lakh crore from just 6 crore units worth Rs 19,000 crore in 2014.

About SPECS scheme:

Launched with an outlay of about Rs 3,300 crore, the objective of this scheme is to promote component manufacturing in India by offering companies a 25% incentive on their capital expenditure. The government has set an investment range of Rs 5 crore to Rs 1,000 crore for entities willing to set-up component plants under the scheme. 

  • This scheme reduces import of electronic components, which the industry currently undertakes to assemble products here.
  • This will remain open for 3 years for investors to apply and for 5 years for investments. 

About EMC 2.0:

The EMC 2.0 Scheme provides financial assistance for setting up of both EMC projects and Common Facility Centres (CFCs) across the country.The outlay of the scheme is about Rs.3700 crore. The Scheme is open for receipt of applications for a period of 3 years from the date of notification. Further period of 5 years is available for disbursement of funds to the approved projects.

For EMC Project:Financial assistance will be restricted to 50% of the project cost subject to a ceiling of Rs. 70 crore for every 100 acres of land. For larger areas, pro-rata ceiling would apply but not exceeding Rs.350 crore per project. The remaining project cost will be borne by State Government or State Implementing Agency (SIA) or Central Public Sector Unit (CPSU) or State Public Sector Unit (SPSU) or Industrial Corridor Development Corporation (ICDC) such as DMICDC, etc. (as the case may be) with a minimum contribution of 50% of the project cost.

For Common Facility Centers (CFCs):Financial assistance will be restricted to 75% of the project cost subject to a ceiling of Rs.75 crore. The remaining project cost will be borne by State Government or State Implementing Agency (SIA) or Central Public Sector Unit (CPSU) or State Public Sector Unit (SPSU) or Industrial Corridor Development Corporation (ICDC) such as DMICDC, etc. (as the case may be) with a minimum contribution of 25% of the project cost.

Points to be noted:

-The government invited applications from companies looking to invest in India under these schemes, as it plans to initially get the top five global mobile manufacturing companies, and promote five domestic companies on the national scale.

-The above three Schemes are expected to attract substantial investments, increase production of mobile phones and their parts/ components to around Rs.10,00,000 crore by 2025 and generate around 5 lakh direct and 15 lakh indirect jobs.

About India’s Electronic Industry:

The electronics industry of India is one of the fastest growing sectors, expected to reach $400 billion by 2025.

  • It has grown from Rs. 1,90,366 crore in 2014 to Rs. 4,58,000 in 2018. 
  • The country’s share in global manufacturing also rose from 1.3% in 2012 to 3% in 2018. 
  • Between 2018 and 2019, exports grew by 38% year-on-year.