production-linked-incentivepli-scheme-for-electronics-manufacturers-summary

Context: Global electronics giants (such as Samsung, Pegatron, etc) are in final stages of negotiations to benefit from the production linked incentive (PLI) scheme for making mobile phones and certain other specified electronic components.

About PLI scheme:

  • It is a Ministry of Electronics and Information Technology’s (MeitY), Government of India, scheme.
  • As a part of the National Policy on Electronics, the scheme would give incentives of 4-6 per cent to electronics companies which manufacture mobile phones and other electronic components such as transistors, diodes, etc, and nano-electronic components such as micro electromechanical systems.
  • Tenure of the scheme: The PLI scheme will be active for five years with financial year 2019-20 considered as the base year for calculation of incentives. The total incentives over five years has been kept at Rs 40,951 crore.
  • Companies and investments to be considered for incentives: 
    • Companies: All electronic manufacturing companies which are either Indian or have a registered unit in India will be eligible to apply for the scheme. 
      • These companies can either create a new unit or seek incentives for their existing units from one or more locations in India.
    • Investments: Any additional expenditure incurred by companies on plant, machinery, equipment, research and development and transfer of technology for manufacture of mobile phones and related electronic items will be eligible for the incentive scheme.
      • However, all investment done by companies on land and buildings for the project will not be considered for any incentives or determine eligibility of the scheme.

Significance: The scheme will on one hand attract big foreign investment in the sector, while on other encourage domestic mobile phone makers to expand their units and presence in India.

  • The scheme will help in building a robust manufacturing ecosystem that will help offset the disability for domestic electronics manufacturing by providing state-of-the-art infrastructure.
  • The scheme will contribute significantly to achieving a USD 1 Trillion digital economy and a USD 5 Trillion GDP by 2025.
  • Employment generation: The government aims to manufacture electronics worth Rs. 8 lakh crore, while generating employment for about 10 lakh people in the next five years.

The launch of the PLI scheme along with other electronics incentive schemes, is an effort to promote the central government’s clarion call for Aatma Nirbhar Bharat - a self-reliant India - to enhance its capacity and develop an ecosystem as an asset to the global economy.

Other electronics incentive schemes:  

Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS): 

  • The SPECS shall provide financial incentive of 25% on capital expenditure for the identified list of electronic goods, i.e., electronic components, semiconductor/ display fabrication units, Assembly, Test, Marking and Packaging (ATMP) units, specialized sub-assemblies and capital goods for manufacture of aforesaid goods. 

Modified Electronics Manufacturing Clusters (EMC 2.0) Scheme:

  • The EMC 2.0 shall provide support for creation of world class infrastructure along with common facilities and amenities for attracting major global electronics manufacturers, along with their supply chains.
  • The earlier version was launched in 2012.

Background:

Promotion of electronics manufacturing has been a key component of the Make in India program. 

  • With efforts such as the National Policy on Electronics, 2019, Modified Special Incentive Scheme (MSIPS), Electronics Manufacturing Clusters and Electronics Development Fund etc, India's production of electronics grew from USD 29 billion in 2014 to USD 70 billion in 2019. 
  • The growth in mobile phone manufacturing in particular has been remarkable during this period. 
    • From just 2 mobile phone factories in 2014, India now has become the 2nd largest mobile phone producer in the world.  
  • While the exports of electronics has increased, India’s share in global electronics production has reached 3% in 2018 from just 1.3% in 2012.

National Policy on Electronics 2019

  • The Policy envisions 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.

Modified Special Incentive Package Scheme(M-SIPS)

  • To offset disability and attract investments in Electronic manufacturing, Modified Special Incentive Package Scheme (M-SIPS) was notified in 2012.
  • The scheme is available for both new projects and expansion projects. 
  • The scheme provides capital subsidy of 20% in SEZ (25% in non-SEZ) for units engaged in electronics manufacturing. 

Electronics Development Fund (EDF)

  • Creating a vibrant ecosystem of innovation, Research and Development (R&D) with active industry involvement is essential for a thriving electronics industry. 
  • It is with this objective that an Electronics Development Fund (EDF) is set up as a “Fund of Funds” to participate in professionally managed “Daughter Funds” which provide risk capital to companies developing new technologies in the area of Electronics, Nano-electronics and Information Technology (IT). 
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