The Union Cabinet has approved scheme for the development of Electronics Manufacturing Clusters (EMCs).

The proposed scheme would support setting up of both Greenfield and Brownfield clusters.

“EMCs would aid growth of the Electronics Systems Design and Manufacturing (ESDM) sector, help development of entrepreneurial ecosystem, drive innovation and catalyse the economic growth of the region by increasing employment opportunities and tax revenues,” the Cabinet note passed on late Tuesday evening said.

Computer and mobile handsets manufacturing can benefit from this scheme because this will make components available locally. These companies are currently importing components from countries such as China and Taiwan.

The scheme is expected to help flow of investment for development of world-class infrastructure specifically targeted towards attracting investment in the ESDM sector, the Cabinet decision said.

Welcoming the approval, Mr Sabyasachi Patra, Executive Director, Manufacturers’ Association of Information Technology India, said this would help in increasing the flexibility and robustness of the electronic manufacturing ecosystem. “The scheme will lead to innovation and entrepreneurial ecosystem. Thus in the long term, it would give a fillip to growth and development, and employment generation in the ESDM sector,” he said.

Domestic manufacturing

The approval also signals to promote domestic manufacturing of electronics by providing support for all parts of the manufacturing eco-system to co-locate and derive co-location advantages, Mr P.V.G. Menon, President, India Semiconductor Association, said.

He said this would also help the small and medium enterprises sector in electronics grow. It would go a long way in strengthening supply chain for domestic manufacturing of electronics.

“The scheme does not distinguish between Indian and foreign investors. FDI investment into the sector is very welcome and we hope that this will be in the area of high-value-added manufacturing,” Mr Menon said.

Some of the features of the proposal include assistance to provide special purpose vehicle (SPV) that should be legal entity duly registered for this purpose.

Financial assistance

The SPV may be promoted by private companies, industry associations, financial institutions, research and development institutions, State or Local governments or their agencies and units within the EMC. “The SPV should consider including an academic or research institution to be part of the proposed SPV for suitable academic-industry linkages,” it said.

The financial assistance to the SPV would be in the form of grant-in-aid only. For Greenfield clusters, assistance would be restricted to 50 per cent of the project cost subject to a ceiling of Rs 50 crore for every 100 acres.

For Brownfield clusters, the assistance would be restricted to 75 per cent of the project cost subject to a ceiling of Rs 50 crore, the Cabinet said.

It would be open for applications for five years from the date of notification. It is a policy decision with no automatic financial commitment and the financial assistance under the policy would be subject to approval by the Competent Authority following due process. The draft policy aims to achieve a turnover of about Rs 22 lakh crore ($400 billion) by 2020 and employment to around 28 million people at various levels.

Meanwhile, the Cabinet is expected to take a decision next week on the proposed national policies on IT and telecom equipment manufacturing, the Telecom and IT Minister, Mr Kapil Sibal, said here at a CII event.

(This article was published on July 4, 2012)
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