Cabinet approves $2.7 billion outlay to locally make electronics components

New Delhi: The Union cabinet on Friday approved a $2.7-billion ( ₹22,919 crore) outlay to incentivize local manufacturing of electronics components in India, setting goals for domestic and foreign entities to establish local component manufacturing facilities at subsidies of up to 50% of the project costs.

Union information technology minister Ashwini Vaishnaw said at a briefing post the cabinet approval that the six-year incentive plan sought to attract investments of $7 billion ( ₹59,350 crore), aimed at building products worth $53.5 billion ( ₹4.6 trillion). He added that the plan will include employment targets for every incentive type, cumulating in 91,600 jobs being created during its six-year window.

The areas of focus include sub-assembling of display and camera modules, printed circuit boards, lithium-ion battery cells, and enclosures for mobile and electronics hardware.

For all of these categories, applicants will be offered turnover targets, based on which an incentive layout will be determined. The rates will be finalized in line with the incentive layout in India’s semiconductor incentive schemes.

The scheme is also looking to localize the making of components and capital goods that will be used in the manufacturing processes, for which the Centre will offer a capital expenditure-based incentive scheme. However, the incentive layout will be less than 50% of the expenditure from the company, a senior government official told Mint requesting anonymity.

A $500-billion electronics economy

Speaking at a media briefing shortly after the cabinet announcements, Vaishnaw said applicants will be subjected to a “minimum investment criteria”. “We are also working on labour, customs and taxation-related reforms for electronics manufacturing to grow,” he added.

“Within 10 years of manufacturing, we have reached 20% value addition. Now, we must target doubling this in the next five years by manufacturing both passive and active components. Active components will come through the semiconductor mission, and passive will come with the electronics components scheme,” Vaishnaw said.

India is also awaiting cabinet approval of its second semiconductor incentives scheme, which is expected to focus on setting-up semiconductor component manufacturing and advanced fabrication units in the country.

Vaishnaw said India already manufactures $120 billion worth of electronics and that India was targeting a $500-billion electronics economy by 2030.

High-value electronics

Industry stakeholders welcomed the decision, hailing it as a positive one for both domestic companies and global investors.

Josh Foulger, president of electronics at electronics manufacturing services firm Zetwerk, said the company is “actively engaging with partners, and is open to collaborations to build a strong component ecosystem in India”.

The executive added that the scheme can help India focus on “growth of high-value electronics, increased value addition, and opportunities for innovation and employment.”

“This (the scheme) will enable much higher value addition in the country for electronics manufacturing, and will attract more investments in system products—as local availability will enable just-in-time manufacturing,” said industry veteran Ajai Chowdhry, co-founder of HCL Technologies Ltd and chairman of Epic Foundation.

“We also eagerly await the ‘design in India’ scheme for chips, and systems that will complete the full ecosystem,” added Chowdhry, who had for long been advising the Centre to focus on building components locally for greater value addition and geopolitical independence.