M-SIPS to be reconstructed over Finance Ministry’s subsidy concerns

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M-SIPS, Finance Ministry, subsidy, India

A key programme of the government, aimed at boosting electronic manufacturing, is set for a revamp after a prolonged tussle between the Department of Electronics and Information Technology and the finance ministry led to scores of investment proposals getting stuck.

This is after the finance ministry raised concerns over the lack of clarity in the quantum of subsidy outgo under the open-ended M-SIPS (Modified Special Incentive Package Scheme) framework, valid till 2020.

The M-SIPS policy incentivises companies to manufacture domestically by providing them a 20-25 per cent subsidy on capital expenditure. Approvals under the scheme have been on hold for the last couple of months after the finance ministry raised the concerns. The hiatus has upset an industry that had started to look at India as a manufacturing hub.

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So far, proposals worth Rs 18,000 crore have been approved under the programme with an estimated subsidy of around Rs 4,000 crore to be paid over the next 10 years. The policy is seen as key to achieving Prime Minister Narendra Modi’s goal of having net zero balance of electronics and imports and exports.

The IT ministry, on the other hand, is of the view that it will be difficult for it to come up with an exact estimate since there are companies that roll back their plans even after their proposals are approved or do not put in the exact amount of investment as earlier committed.

The policy was launched in July 2012 for a three-year period and was recently revised to include white goods manufacturers and was extended till 2020. The government is now also thinking of prioritising the scheme — it has received investment proposals upwards Rs 1 lakh crore — on segments of electronics manufacturing which truly deserve the subsidy.

The finance ministry’s idea is to make sure that the processes are robust enough to stand scrutiny even after a few years. Since its inception, companies such as Bosch Electronics, Samsung Electronics and Tejas Networks have sought government subsidy for their manufacturing facilities under this scheme.

By EB Bureau

 

 

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