M-Special Incentive Package Scheme may link sops to generation of jobs in phase II

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The government’s scheme to incentivise electronics manufacturing may undergo a change in its next phase, including to link sops to employment generation, officials in the know of the discussions said.

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The Modified Special Incentive Package Scheme (M-SIPS), which was launched in 2012, will end in December this year and discussions are ongoing about launching a second phase.

Investment proposals that the government has so far received will require it to offer subsidies worth more than Rs 10,000 crore, the cap set by the finance ministry to provide benefits under the M-SIPS programme.

But many of these proposals have yet to get the subsidy benefits, prompting the country’s top policy think tank, Niti Aayog, to ask the Ministry of Electronics and IT (MEITY) to expedite the process of releasing the money by taking up proposals on a priority basis.

M-SIPS is one of the largest schemes under the Narendra Modi government to get foreign investment and turn India into an electronics manufacturing hub for everything from mobile chargers to medical devices.

The government has so far received 245 proposals for investing Rs 54,853 crore and 142 of those have been approved. The total subsidy outgo required against these projects across all phases is estimated to be Rs 11,130 crore.

Out of the application that has been approved, commercial production with investment totalling Rs 3,875 crore. Proposals have come in for two mega projects, with total investment of up to Rs 37,576 crore. According to government statistics, so far Rs 122 crore had been disbursed to 11 applicants. Another 36 claims for Rs 297 crore are under process.

According to Economic Times, talking about the subsidy amount stuck under the scheme, a top official of the NITI Aayog said: “IT ministry should expedite the process of releasing the subsidy money and take up the proposals on a priority basis.”

An official at MEITY said the scheme picked up steam from 2015 but the procedures for disbursement of subsidy were not very “firmed up”. The ministry has now identified an agency, IFCI, which will verify claims, he said.

“Till now we have got around 50-plus applications for reimbursement,” he said, adding that several of these were returned because they didn’t have the requisite documentation or did not meet the eligibility criteria. MEITY held a round of meetings with the investors as well as industry associations to explain the requirements and gaps with filings because of which projects were delayed or claims returned, the official added.

The MEITY official said the ministry is working on a new National Electronics Policy and is mulling whether to continue with the M-SIPS scheme or have some variation of it after the current one ends in December 2018.

“Policy discussion is on. We feel M-SIPS should go through amendment, it should be simpler and linked with institutional appraisal of disbursement. It should either be in an interest subsidy form or some credit default guarantee form,” said the official, requesting not to be named.

Niti Aayog is of the view that M-SIPS incentives should be linked to employment generation.

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