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MeitY Plans Billion-Dollar Subsidy Scheme For Component Manufacturing

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Reports indicate that the Government will offer subsidies for lands obtained to manufacture electronics components in categories where the investment-to-output ratio is not high.

The Union Ministry of Electronics and Information Technology (MeitY) has planned subsidies for acquiring land to build factories in certain high-value electronics component categories under an incentive scheme. The scheme, part of the Government’s 100-day agenda, might be rolled out in August-September of this year with an anticipated expenditure of Rs 30,000 crore. 

According to reports, most of the expenditure will focus on capital subsidies for procuring land to establish factories in component categories where the investment-to-output ratio is relatively low.

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The upcoming scheme is likely to replace the Scheme for the Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS), which concluded on March 31 this year. 

SPECS offered a 25 per cent financial incentive on capital expenditures for a range of electronic products, including electronic components and display fabrication facilities.

The MeitY is currently consulting the NITI Aayog and the Finance Ministry for this scheme, after an initial meeting with the industry stakeholders. There might be more rounds of discussion before the new scheme is finalised.  

It has been reported that the scheme will focus on specific component items, aiming for areas with sufficient value-added potential, sectors where rapid scaling is possible, and strategic importance akin to semiconductors.

According to an anonymous source who spoke to Moneycontrol, the approach will not strictly follow the PLI scheme format. It might include various elements made for specific situations, including cases where capital subsidies are necessary.  PLI schemes usually target sectors with a high investment-to-output ratio. However, in certain component categories, the investment might be significant while the turnover may not match, necessitating policy adjustments.

As per another statement, the government aims to build competencies through the scheme, ensuring that it serves an entire industry segment. This can mark the evolution of existing PLI schemes for mobiles and IT hardware.

Additionally, the government plans to expedite approvals for Chinese companies entering India through local partners to establish component facilities under a new scheme, part of the “China Plus One” strategy. This, along with the existing PLI schemes for mobile and IT hardware, aims to enhance India’s role in the global electronics supply chain, increasing local value addition from 18-20% to 35-40%. 

Higher value addition in electronics manufacturing will lead to greater use of locally sourced components, reducing imports and increasing revenue retention within the country.

The India Cellular & Electronics Association (ICEA) has already requested MeitY Rs 30,000-35,000 crore for the components scheme with capital support. They seek incentives to meet $75-80B demand by 2026 and $300B by 2032 for electronics manufacturing goals.

India aims to achieve $300 billion in electronics production revenues by 2025-26, up from approximately $103 billion currently.

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