India offers incentives worth billions to boost electronic, mobile production

03, Jun. 2020

Photo by Daniel Romero on Unsplash
Photo by Daniel Romero on Unsplash

By Atul Ranjan

NEW DELHI, NNA - India has urged firms to take advantage of its new package of incentive schemes to boost electronic production especially of mobile phones in the country.

The three initiatives are production linked (PLI) incentive, component manufacturing schemes (SPECS) and cluster schemes (EMC 2.0). Collectively, the schemes offer benefits worth a total of 500 billion rupees ($6.6 billion)

The financial incentives and ready-to-use cluster facilities are part of a strategy to make the country a global manufacturing base for mobile phones and their parts, among others.

Going for bold reforms and self-reliance, the administration of Prime Minister Narendra Modi also wants mobile phones to be the country's number 1 export.

It has set the target for mobile production to increase by 35 to 40 percent to 10 trillion rupees by 2025, Ravi Shankar Prasad, the Minister for Electronics and Information Technology, said at a press conference on Tuesday. The move can also generate half a million jobs.

The PLI scheme to facilitate large-scale mobile manufacturing offers an incentive of 4 to 6 percent on incremental sales of mobile phones and related parts made in India over a period of five years.

The minister said the government will select “five global champions" to participate in the PLI scheme. Five Indian companies will also be picked for the scheme to help them become global players.

Ravi Shankar Prasad, the Minister of Electronics and Information Technology (NNA)
Ravi Shankar Prasad, the Minister of Electronics and Information Technology (NNA)

Recently, Indian mobile phone manufacturer Lava International Ltd. announced it will move its handset production and research and development in China back home.

The Scheme for Promotion of Manufacturing of Components and Semiconductors (SPECS) is aimed at promoting component manufacturing in India while reducing imports of electronic components, which the industry is currently relying on to assemble products.

The SPECS incentive offers a 25 percent reimbursement on capital expenditure for electronic parts, semiconductors and other components.

Catering to manufacturers such as mobile phone makers and their supply chains, the Electronics Manufacturing Cluster Scheme (EMC 2.0), which modifies an existing scheme, will provide ready-to-use factory structures and facilities for large manufacturing clusters and other infrastructure requirements.

The three incentives are among the steps taken by Asia’s third-largest economy to attract global companies seeking to diversify their production bases outside China amid its trade spat with the United States and disruptions to supply chains arising from lockdowns to curb the spread of the novel coronavirus.

They are part of a slew of measures to help revive the economy which is sliding into a contraction this fiscal year because of the pandemic and a prolonged lockdown.

Hailing the package of incentives as historic for India's electronics industry, the Federation of Indian Chambers of Commerce and Industry (FICCI), said the schemes will help integrate domestic electronic production with the global supply chain and build a robust manufacturing ecosystem in the country.

“The roadmap launched today of the 500 billion rupees incentive schemes is encouraging for the electronics industry,” Manish Sharma, chair of FICCI Electronics Manufacturing Committee, said in a statement.

“We believe, the electronics industry in India can increase its potential multi-fold by 2025, with backward integration,” said Sharma, who is also the president and CEO of Panasonic India Pvt. Ltd., a subsidiary of Japan's Panasonic Corp.

India has rolled out several policy measures in the past few years to promote domestic manufacturing of electronic items to reduce import dependency.

According to rating agency Crisil Ltd., a unit of Standard & Poor's Financial Services LLC, around 67 percent of electronic components and mobile handsets are imported from China.

India’s production of electronics has jumped from $29 billion in 2014 to $70 billion in 2019. Its share in global electronics production rose to 3 percent in 2018 from just 1.3 percent in 2012, Prasad said. Exports grew by 38 percent year-on-year between 2018 and 2019.

According to the government, the production of mobile devices in the country ballooned from $2.9 billion to $24.3 billion between 2014-15 and 2019.

While the incentive schemes are meant to give mobile manufacturing a huge push, the government said other sectors like automobile electronics, medical electronics, defense and strategic electronics will also stand to benefit from them.