Proposal to Introduce Dedicated PLI Scheme for Electronics Component Manufacturing Under Review

The Ministry of Electronics and Information Technology (MeitY) is currently in the process of evaluating a proposal to introduce a separate production-linked incentive (PLI) scheme specifically for electronics component manufacturing, according to sources familiar with the matter. MeitY is expected to engage in discussions with the Ministry of Commerce and Industry as well as NITI Aayog to explore the potential and structure of this proposed scheme.

The need for a dedicated PLI scheme for local electronics component manufacturing has arisen from ongoing dialogues between the government and the industry. Several industry players, including Dixon Technologies, have urged the government to establish a distinct PLI scheme for electronics components, separate from the existing scheme for promoting the manufacturing of electronic components and semiconductors (SPECS). The aim is to make India self-reliant in the entire value chain of the electronics ecosystem, government officials noted.

Industry representatives have emphasized that a separate PLI scheme would address the issue of the government's current 'one size fits all' approach. The current SPECS scheme bundles together all capital goods, active and passive electronic components, as well as semiconductor wafers and integrated chips (ICs). It offers a financial incentive of 25% of capital expenditure for the manufacturing of these goods.

However, electronic components, especially passive ones, vary significantly in terms of financial requirements, sizes, valuations, and production techniques. Achieving the necessary scale under the current scheme has proven challenging, as pointed out by an executive at an electronics manufacturing company. While the Ministry of Electronics and Information Technology intends to discuss this matter with the Ministry of Commerce, the latter currently does not appear enthusiastic about introducing additional PLI schemes, according to government officials.

The decision on policy intervention for component manufacturing is crucial, as the existing Rs 3,285 crore SPECS scheme is only open until March 31, 2024. The government is also considering a proposal to extend the scheme's outlay to Rs 10,000 crore and extend its duration by five years.

The next steps involve the Ministry of Electronics and Information Technology, NITI Aayog, and industry stakeholders discussing the prospects of a new PLI scheme and establishing a framework to determine the kind of incentives that can be provided to companies planning to manufacture components in India. Government officials emphasize the importance of collaborating with the industry to understand the required policy adjustments within the current incentive framework.

Among other concerns, the industry has also highlighted delays in receiving incentives under the SPECS scheme upon application submission. An industry executive suggested that a similar approach to what the government is doing in the semiconductor sector could be applied to the electronics component sector to attract global players to initiate component manufacturing in India.

To facilitate this process, the Ministry of Electronics and Information Technology has formed a nine-member task force with industry players. The task force's responsibilities include deliberating on electronic products and components that can be brought under domestic manufacturing, addressing current hardware manufacturing issues, exploring the need for policy intervention, and establishing a timeline for issue resolution.

Key industry representatives, such as Ajai Chowdhry, founder of HCL; Sanjay Nayak of Tejas Networks; Vivek Tyagi, former chairperson of the India Electronics and Semiconductor Association (IESA); Aman Gupta of boAt; and Sunil Vachani, chairman of Dixon Technologies, among others, are part of the committee.

The government has set a target of achieving $300 billion in electronics manufacturing production by 2025-2026, significantly increasing from $102 billion in FY23.