Electronics Components Incentive Policy

Context: The Ministry of Electronics and Information Technology (MeitY) has finalized an incentive policy for electronic components manufacturing with a total outlay of ₹22,919 crore over six years.

Key Features of the Electronics Components Incentive Policy Scheme

• Targeted Electronic Components: The scheme will focus on encouraging the production of key components that are currently imported, including:
  • Display modules, Sub-assembly camera modules, Printed circuit board assemblies (PCBAs), Lithium cell enclosures, Resistors, capacitors etc.
• Employment Creation:
  • Total Direct Jobs Target: 91,600 direct jobs over six years
• Increasing local value addition:
  • The Production-Linked Incentive (PLI) scheme for smartphone manufacturing has been successful in attracting major companies like Apple and Samsung.
  • However, despite the rise in domestic assembly, local value addition remains at 15-20%, and the government aims to increase it to at least 30-40%.
• Structure of Incentives: The scheme will offer three types of incentives:
  • Operational Incentives – Based on net incremental sales, similar to the PLI model.
  • Capital Expenditure (Capex) Incentives – Based on eligible capital investments.
  • Hybrid Model – A combination of operational and capex incentives.
• Eligibility Criteria:
  • Both Greenfield and Brownfield investments are eligible.
  • Foreign companies can participate by:
    • Transferring technology to an Indian company, OR
    • Forming a joint venture with a domestic firm.

Key Challenges faced in Electronic Components Manufacturing

• Lack of Domestic Scale – India’s current capacity is only 10% of total electronics production.
• High Investment-to-Turnover Ratio –
  • In smartphone production, every ₹1 invested generates ₹20 in revenue.
  • In electronic components, every ₹1 invested generates only ₹2-4.
• Heavy Import Dependency –
  • Electronics imports are India’s second-largest import category after oil.
  • 75% of India’s electronics production relies on imported components.
• The demand-supply gap in the electronic components sector is huge:
  • Current domestic production (2022-23): $10.75 billion.
  • Domestic consumption gap: $100 billion.
  • Potential export demand: $140 billion.

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