The scheme will offer subsidies for acquiring land to set-up factories for manufacturing critical components.
A couple of days after Narendra Modi was elected as Prime Minister for the third consecutive time, reports in the media surfaced that the union cabinet, is all set to unleash Rs 30,000 Crore electronics component scheme. The scheme, which is a part of the government’s coming 100 day agenda, will provide ample subsidies for acquiring land to set-up industries for manufacturing critical components.
An exclusive report by Moneycontrol stated that the scheme is expected to be rolled out in August-September and the majority of the funds will be allocated towards capital subsidies for purchasing land to manufacture certain electronic components, which has a lower capital output ratio. The upcoming scheme will appear in place of Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS), which has already expired on March 31. A senior government official who wishes to be unnamed told Moneycontrol, "We are not doing it as a PLI scheme… It may or may not be a PLI. It could be a mix and match of a variety of things because there will be certain cases where we have to do a capital subsidy."
It is also reported that the PLI scheme works in those areas where the capital output ratio is very high, but when it comes to certain components, the situation is different. This is because investment volumes will be higher for certain categories of components, but it’s not necessary that the profit out of that investment will be higher. Therefore, there is a requirement to carefully analyze the policy.
After detailed consultations with industry bodies and manufacturers, MeitY is now holding deep discussions with NITI AAYOG and the finance ministry. Another unnamed government official told media, “The scheme will target select component items, and we will target areas where the opportunity of value add is significant along with areas where we don’t have any presence but we can ramp up quickly. Thirdly, areas which would become strategic in nature similar to semiconductors."
In fact, it is also highly anticipated that the central government is now looking forward to giving approvals to certain Chinese companies to enter the Indian market along with Indian partners to set-up the complete facilities for components. With the upcoming scheme and the current PLI scheme for mobile and IT hardware industry, the Modi government aims to achieve a target of 35-40 percent domestic value addition in the electronics supply chain. Currently, the local value addition in this segment is 18-20 percent, claims Moneycontrol.
