Govt proposes to expand scope of electronics manufacturing subsidy scheme

In line with Prime Minister Narendra Modi's stated agenda of promoting 'Made-in-India' items, the Department of Electronics and Information Technology has proposed to revise the electronics manufacturing subsidy scheme, making it more investor-friendly and expanding its ambit to include several new categories, with white goods being the most significant.

The addition of consumer durables under the Modified Special Incentive Package Scheme (MSIPS) could spur big-ticket investment in the country. Several large multinational firms such as Panasonic, Samsung and Videocon, among others, are said to have approached the department seeking the same incentives offered to manufacturers of electronics.

The department is currently seeking the industry's inputs on the revised draft of the policy, which was notified in 2012 and is supposed to expire in July 2015. An official said that an extension of the policy for another three years is being proposed. "The procedure is also being streamlined to reduce delay in processing of the applications plus the (investment) thresholds have been rationalised and additional verticals are being added," added the official.

The new verticals that are being added include nuclear fuel cells, smart cards, capital equipment along with white goods. "The incentives under the scheme will henceforth be available from the date of receipt of application. Consequently, the period of 10 years for which an applicant is eligible for claiming incentives shall also be reckoned from the date of application," says the draft a copy, which has been reviewed by Business Standard.

According to a research paper by Consumer Electronics and Appliances Manufacturers Association and APCO Worldwide, the total investment proposals under MSIPS are worth over Rs 70,000 crore. However, the investment proposals related to consumer electronics are just one per cent of the entire investment proposals. "Though it is a positive start, the policy needs 'incremental modifications' to attract much more investments," the paper noted.

The electronic industry is valued at $1.75 trillion globally, and is expected to reach $2.4 trillion by 2020, according to 2013 estimates. The organisations had made representations to both the Department of Electronics and IT and the Department of Industry Policy and Promotion.

Rameesh Kailasam, senior director, APCO Worldwide, said consumer electronics is regarded as the largest and the fastest-growing manufacturing industry in the world. "Its inclusion in MSIPS will significantly enhance investment in the country, create jobs and reduce the import bill."

After receiving the industry's comments, the revised policy will be sent for inter-ministerial consultation, and thereafter for approval by the Cabinet. Under MSIPS, the government provides 20-25 per cent subsidy on capital expenditure for manufacturers of electronics. The revised policy has also proposed reimbursement of Central taxes and duties for a few categories such as solar cells, nano electronic components, chip components and discrete semiconductors among others.

Promoting domestic manufacturing of electronics has been one of the top priorities of the current government. The recently-unveiled Digital India project of the government envisions a net import-export balance of electronics by 2020. According to current estimates, the demand of electronics will be $400 billion by 2020, out of which $300 billion worth of goods will have to be imported. However, some experts have termed the government's target 'too ambitious'.