MeitY wants fresh incentives for electronics manufacturers
MeitY has proposed fresh incentives to boost electronics manufacturing in India.
The proposals include 4-6% interest rate subsidy on loans for new investments, renewal of the electronic manufacturing cluster (EMC) scheme and waiver of collateral for loans taken to set up machinery.
The move comes after the three marquee schemes of the government designed to kickstart local electronics manufacturing in India ended in 2018. The fresh proposals have been sent to the finance ministry, officials told ET.
Currently, an inter-ministerial panel set up by the Prime Minister’s Office (PMO) and headed by the Niti Aayog is working on a roadmap to develop India as a global hub for electronics manufacturing. “The MeitY secretary is part of the panel and we are giving them inputs, but simultaneously this proposal is also under consideration by the finance ministry,” the official said.
The proposal to offer interest rate subsidy is aimed at making local manufacturing competitive and attracting global companies to set up units in the country. In India, industry gets loans at a higher rate than in rival manufacturing economies such as China and Vietnam. “The current (borrowing) rate is 9-12%, so we have decided on a 4% subvention on most products and strategically important products can get up to 6%,” another official told ET.
The ministry has also proposed allowing new entrepreneurs to set up manufacturing facilities without having to give personal collateral under the credit guarantee scheme. “Our industry’s problem is higher interest finance cost and providing collateral to banks, which is what we have tried to address in the proposal in order to nurture the hardware ecosystem,” said the official.
Under the EMC scheme notified in 2012, the government provided financial assistance of up to 50% of the project cost, subject to a ceiling of Rs 50 crore for every 100 acres of land for greenfield projects and 75% of the project cost subject to a ceiling of Rs 50 crore for brownfield projects. As of May 2018, the government had received 50 applications under the scheme. The three major government schemes that were designed to aid India’s manufacturing push in electronics ended last year – the Modified Special Incentive Package Scheme (MSIPS), EMC and the Electronic Development Fund, which have not been renewed so far, leaving industry with few sops to invest in the country’s electronics manufacturing space.
While the government released the new National Electronics Policy earlier this year, specific incentives are being finalised. The policy aims at a turnover of $400 billion in domestic electronics manufacturing by 2025, along with promoting easeof-doing business for the electronic system design and manufacturing sector and encouraging industryled research and development and innovation in new areas such as 5G.
The policy targets production of 1 billion mobile handsets valued at $190 billion by 2025, including export of 600 million handsets valued at $110 billion.
A section of the industry, however, is unhappy with the policy, calling it only a statement of intent and arguing for special incentives to help develop India as an electronics manufacturing hub rivalling China and Vietnam, ET reported earlier this year.