The Union Cabinet is likely to consider the National Policy on Electronics and Modified Special Incentive Package Scheme (M-SIPS) for electronic goods manufacturing on Thursday .

The policy, when implemented, would boost design and manufacturing of electronic goods such as mobile handsets, semiconductor, wafer fab, consumer electronics and telecom network equipment.

It would attract investment in electronic system design and manufacturing industries, a senior Government official said.

Marketable technology

Under the policy, various packages are being envisaged, including reimbursement of indirect taxes and a subsidy of 20 per cent on capital expenditure made by high-tech manufacturers in special economic zone (SEZ) units.

Investments made in non-SEZ units could get a subsidy of 25 per cent. The Ministry of Finance has agreed to the proposal with a ceiling of Rs 10,000 crore during the 12th Plan.

The subsidy may be linked to the project outcome in a bid to ensure that companies invest in cutting edge technologies that are marketable. For example in the case of semiconductor wafer fab, 75 per cent of the overall subsidy could be linked to production milestones.

Cess on electronics

In order to raise the initial corpus for the project, the Department of Electronics and Information Technology (DeitY) has proposed to levy a cess on all electronic products sold in the country.

The revenue earned from the cess will be put into the National Electronics Mission fund. According to estimates made by the DeitY, the Government will end up being net revenue earner by 2020.

According to DEITy, if production reaches Rs 22 lakh crore by 2020, then the Government subsidy will amount to Rs 1,80,675 crore while the revenue accruals will be Rs 3,21,860 crore, according to projections made by DeitY.

The Union Cabinet on July 4 had also approved scheme for the development of Electronics Manufacturing Clusters (EMCs) that would support setting up of both greenfield and brownfield clusters.

“EMCs would aid growth of the Electronics Systems Design and Manufacturing sector, help develop the entrepreneurial ecosystem, drive innovation and catalyse the economic growth of the region by increasing employment opportunities and tax revenues,” the Cabinet had said.

SPVs

Some of the features of the policy include assistance to provide special purpose vehicles (SPV) that should be legal entities duly registered for this purpose.

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 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.

ronendrasingh.s@thehindu.co.in

(This article was published on July 11, 2012)
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