In a bid to incentivize electronics manufacturing in India, the ministry of communications and information technology (IT) has released a draft national policy for public comment.
The electronics policy along with two others—on IT and telecom, which are currently being drafted—will be sent to the cabinet for approval together.
Kapil Sibal, minister for communications and IT, said domestic electronics production is $20 billion (Rs 98,800 crore), which, at the current rate of growth, will increase to $100 billion by 2020. By then, demand would have risen to $400 billion, leaving a $300 billion deficit.
“We can’t afford it,” said Sibal, while unveiling the draft policy, which he said “will give the required impetus to the sector”.
Details of the proposals under the draft national policy are still being worked upon, said Sibal.
“This is a draft policy framework, which should be finalized by December,” he said. The policy is expected to bring in $100 billion of investment and create 28 million jobs by 2020.
The policy, which aims to create an ecosystem to promote electronics systems design and manufacturing, will offer a modified special incentive package scheme and also set up a fund of funds to boost research and development. The ministry has recommended that the quantum of the fund should be Rs 5,000 crore, Sibal said.
The policy also promises a 10-year stable tax regime for manufacturers in order to attract global investment. Other proposals include setting up around 200 electronic manufacturing clusters with the high-quality infrastructure that’s required.
The policy will also include a provision for preferential market access—30% of all government procurement of electronics will be reserved for locally manufactured products. Keeping in mind that it is nearly impossible to build an entire product domestically, the department of IT (DIT) has proposed various slabs of value addition for the products, which will gradually increase over the years.
Although Sibal said the policy will be developed in a way that does not violate World Trade Organization norms, as reported by Mint on 14 September, the industry has expressed its concern as even the percentage of value addition suggested by DIT for the first year may be difficult to achieve. Currently, the industry imports components and kits for local assembly leaving very little room for value addition.
“Broadly, we welcome the policy and also the name change of the department of information technology to department of electronics and information technology,” said P.V.G. Menon, president of lobby group India Semiconductor Association. “We specifically welcome the electronic product development fund and also the focus on talent development.”