In order to position India as a global hub for Electronics System Design and Manufacturing (ESDM) and push further the vision of the National Policy on Electronics (NPE) 2019, three schemes namely the Production Linked Incentive Scheme (PLI), Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS) and Modified Electronics Manufacturing Clusters Scheme (EMC 2.0) were notified in April 2020. A fourth scheme, namely the Production Linked Incentive Scheme (PLI) for IT Hardware was notified in March 2021.
Electronics manufacturing in India has grown rapidly with a CAGR of around 23% during the last 5 years, with domestic production of electronics hardware touching $76 bn in 2019-20. The electronics manufacturing industry currently provides employment for over 2 million people in India. To further facilitate large-scale manufacturing, the development of a supply chain ecosystem, and the building of new manufacturing clusters in the country, each electronic manufacturing scheme has been carefully constructed to incentivize the electronics manufacturing industry.
Production Linked Incentive Scheme (PLI) for Large Scale Electronics Manufacturing
The domestic electronics hardware manufacturing sector faces a lack of a level playing field vis-à-vis competing nations. The sector suffers disability of around 8.5% to 11% on account of lack of adequate infrastructure, domestic supply chain and logistics; high cost of finance; inadequate availability of quality power; limited design capabilities and focus on R&D by the industry; and inadequacies in skill development.
The vision of National Policy on Electronics 2019 (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 and creating an enabling environment for the industry to compete globally.
The Production Linked Incentive Scheme (PLI) for Large Scale Electronics Manufacturing proposes a financial incentive to boost domestic manufacturing and attract large investments in the electronics value chain including mobile phones, electronic components and ATMP units. Production Linked Incentives of up to INR 40,951 crores will be awarded over a period of 5 years.
Production Linked Incentive Scheme (PLI) for Large Scale Electronics Manufacturing notified vide Gazette Notification No.CG-DL-E-01042020-218990 dated April 01, 2020, offers a production linked incentive to boost domestic manufacturing and attract large investments in mobile phone manufacturing and specified electronic components, including Assembly, Testing, Marking, and Packaging (ATMP) units. The Scheme would tremendously boost the electronics manufacturing landscape and establish India at the global level in the electronics sector.
The scheme shall extend an incentive of 4% to 6% on incremental sales (over a base year) of goods manufactured in India and covered under target segments, to eligible companies, for a period of five (5) years subsequent to the base year as defined.
The Scheme is open for applications for a period of 4 months initially which may be extended. Support under the Scheme shall be provided for a period of five (5) years subsequent to the base year.
The Scheme will be implemented through a Nodal Agency which shall act as a Project Management Agency (PMA) and be responsible for providing secretarial, managerial, and implementation support and carrying out other responsibilities as assigned by MeitY from time to time.
Second Round of the Production Linked Incentive Scheme (PLI) for Large Scale Electronics Manufacturing
After the success of the First Round of Production Linked Incentive Scheme in attracting investments in mobile phone and electronic component manufacturing, the proposal for accepting applications under the Second Round of the PLI Scheme has been approved by the Competent Authority. The target segment for the purpose of this round shall be Specified Electronic Components.
Under the Second Round, incentives of 5% to 3% shall be extended on incremental sales (over base year i.e. 2019-20) of goods manufactured in India and covered under the target segment, to eligible companies, for a period of four (4) years.
The Application Window shall be open until 31.03.2021 initially and may be extended and/or reopened based on the response from the industry. Incentives under the Second Round of the PLI Scheme shall be applicable from 01.04.2021.
Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS)
Development of the supply chain is essential for the manufacturing of electronic products with higher domestic value addition. The vision of National Policy on Electronics 2019 (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.
Electronic components are the basic building blocks for the Electronics Industry and entail maximum value addition. Therefore, a vibrant electronic components manufacturing ecosystem is vital for the overall long-term and sustainable growth of electronics manufacturing in India and essential to achieving a net positive Balance of Payments (BoP).
The Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS) notified vide Gazette Notification No.CG-DL-E-01042020-218992 dated April 01, 2020, will help offset the disability for domestic manufacturing of electronic components and semiconductors in order to strengthen the electronics manufacturing ecosystem in the country.
The scheme will provide a 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, all of which involve high value-added manufacturing.
The Scheme will be applicable to investments in new units and expansion of capacity/ modernization and diversification of existing units. An application under the Scheme can be made by any entity registered in India.
The capital expenditure will be the total of expenditure in the plant, machinery, equipment, associated utilities, and technology, including for Research & Development (R&D).
The Scheme is open for applications initially for 3 years from the date of its notification. Incentives under the Scheme will be applicable from the date of acknowledgment of the application. The incentives will be available for the investment made within 5 years from the date of acknowledgment of application.
The Scheme will be implemented through a nodal agency that will act as Project Management Agency (PMA) and be responsible for providing secretarial, managerial, and implementation support and carrying out other responsibilities as assigned by MeitY from time to time.
Production Linked Incentive Scheme (PLI) for IT Hardware
The IT Hardware manufacturing sector faces the lack of a level playing field vis-à-vis competing nations. As per industry estimates (Source: ICEA and ELCINA), the electronics manufacturing sector suffers from a disability of around 8.5% to 11% on account of lack of adequate infrastructure, domestic supply chain and logistics; high cost of finance; inadequate availability of quality power; limited design capabilities and focus on R&D by the industry; and inadequacies in skill development. There is a need for a mechanism to compensate for the manufacturing disabilities vis-à-vis other major manufacturing economies.
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.
Production Linked Incentive Scheme (PLI) for IT Hardware notified vide Gazette Notification No. CG-DL-E-03032021-225613 dated March 03, 2021, offers a production linked incentive to boost domestic manufacturing and attract large investments in the value chain.
The Scheme shall extend an incentive of 4% to 2% / 1% on net incremental sales (over a base year) of goods manufactured in India and covered under the target segment, to eligible companies, for a period of four (4) years. The Target Segment under PLI shall include (i) Laptops (ii) Tablets (iii) All-in-One PCs and (iv) Servers.
Support under the Scheme shall be provided to companies based on the eligibility criteria laid down, for the manufacturing of goods (covered under the target segment) in India.
The Scheme will be implemented through a Nodal Agency which shall act as a Project Management Agency (PMA) and be responsible for providing secretarial, managerial, and implementation support and carrying out other responsibilities as assigned by MeitY from time to time.
