Guidelines for EMC scheme approved

EMC scheme provides assistance to ESDM units located within EMCs for developing world class infrastructure and common facilities

By EB Bureau

Thursday, July 25, 2013: The guidelines for the EMC scheme were finally approved and released by the Department of Electronics and Information Technology (DeitY) on April 15, 2013, for implementation. The EMC scheme was notified vide notification No. 252 dated August 22, 2012.

Greenfield EMCs: The EMC scheme provides assistance for developing world class infrastructure and common facilities to the electronic system design and manufacturing (ESDM) units located within the EMCs. For greenfield EMCs, the assistance is restricted to 50 per cent of the project cost, subject to a ceiling of Rs 500 million for every 100 acres of land. The remaining project cost will be financed by other stakeholders of the EMC, with a minimum contribution of 25 per cent of the project cost from the units themselves.

Brownfield EMCs: For brownfield EMCs, the assistance will be restricted to 75 per cent of the project cost subject to a ceiling of Rs 500 million. The remaining project cost will be financed by other stakeholders of the EMC, with a minimum contribution of 15 per cent from the units within the EMC.

Special purpose vehicle: The scheme has a provision for each EMC to have a separate special purpose vehicle (SPV) to implement and manage the project. The constitution of the SPV is to be finalised by DeitY in consultation with the Ministry of Finance. In the event of any government or its agency being part of the SPV, the following additional conditions would apply:

• At least one representative of the state government shall be part of the board of directors of the SPV and,
• A change in the equity structure of the SPV would only be effected with the prior approval of the concerned state government.

The two-stage approval process

The EMC scheme provides for a two-stage approval process. Initially, a preliminary approval is given, enabling the applicant to take further steps to finalise all details of the proposed project, including ownership of land, financial tie-ups, etc. Application forms for making a preliminary application as well as the final application are provided along with the guidelines at http://www.deity.gov.in/esdm.

According to the guidelines, an application that seeks assistance can be filed by an SPV implementing the project or a chief promoter, who initiates the setting up of the project and subsequently is a part of the SPV for the operation of the project. The ‘chief promoter’ is a legal entity that initiates the project, either in a brownfield or a greenfield EMC, and takes steps, as and when necessary, to get the project approved from the SPV, and also entrusts the project to the SPV in accordance with the guidelines of the scheme.

The final application

After the initial ‘in-principle’ approval has been given, a time limit of six months is provided to the SPV/chief promoter to file the final application with full details. However, this time period can be extended by the Steering Committee for Clusters (SCC) in the interests of the project.

The final application can be filed only after the land, on which the project is to come up, is in the possession of the applicant. The detailed project report, including estimates of the project components and their economic feasibility, is required at this stage. Cost estimates of the project are to be made based on the current CPWD schedule of rates. The formal sanction letter from the bank is required before the final application.

Types of landownership

The guidelines also recognise landownership of the following types for the purpose of implementing the project:

• Land for the EMC and the project being owned by the applicant; and
• Land for the project being owned by the applicant but the land for the EMC being owned by a different entity.

In the latter case, the applicant has to demonstrate the ability to satisfy the conditions with respect to the units in the EMC, like their individual investment levels, etc.

The land for the EMC or the project can be acquired by the applicant through any one of the following modes:

• Outright purchase or long lease from private parties;
• Sale (outright or conditional), or long lease of land by the central, state, local government or its agency;
• Central, state, local government or its agency participating as an equity partner where the land is provided as the participant’s share of the cost

Project implementation

It is the responsibility of the chief promoter to complete the project within the timelines agreed upon. An applicant can request for an extension of time to implement the project, which may be considered by the SCC. However, no project will be granted time beyond a period of five years from the date of approval for its completion.

Project monitoring and evaluation

DeitY will review the progress of the projects on a quarterly basis through a project review committee (PRC) constituted by it for this purpose. Before disbursement of financial assistance, the applicant will enter into an agreement with the DeitY, which will clearly state all the deliverables, timelines and proposed guarantees and warranties concerning the project.

If any project is cancelled or terminated under the EMC scheme, the time limit for the refund of grant, along with interest, penalties, etc, will be determined by DeitY appropriately.

For all bank assisted projects, before DeitY releases the second instalment of funds, the banks should have disbursed the first instalment. If the project is being funded without bank finance, the binding commitment and the schedule for the full release of funds should be provided. The government may require that certain specific terms and conditions be incorporated into the agreement.

For more details about the guidelines, please refer to the original document at http://www.deity.gov.in/esdm.

The administrative cost of the SPV would be restricted to 3 per cent of the project cost. However, the chief promoter is not eligible for administrative costs. The cost of preparing the detailed project report may be included as part of the administrative expenses. However, the expenditure on pay and allowances shall not form more than 25 per cent of the grant for the administrative expenses.

Electronics Bazaar, South Asia’s No.1 Electronics B2B magazine