The Union Cabinet on Thursday approved another proposal to provide a special incentive package to promote large-scale manufacturing in the Electronic System Design and Manufacturing sector.

The scheme, called the Modified Special Incentive Package Scheme (M-SIPS), would benefit individual IT and electronics companies in setting up manufacturing facility.

The Cabinet had last week had approved a similar scheme for the development of Electronics Manufacturing Clusters (EMCs) that would support setting up of both greenfield and brownfield clusters. Under this scheme, incentives would be provided to multiple companies for shared infrastructure such as road, water and common testing facilities through special purpose vehicle.

“Both the schemes will be part of the National Electronics Policy which will be announced soon,” a senior Government official told Business Line.

Financial help

The financial assistance to the SPV would be in the form of grant-in-aid only. For greenfield and brownfield clusters, assistance would be restricted to 50 per cent and 75 per cent, respectively, of the project cost subject to a ceiling of Rs 50 crore, under the EMC scheme.

Under M-SIPS, the Government would provide subsidy for investments in capital expenditure of 20 per cent for investments in special economic zones (SEZs) and 25 per cent in non-SEZs for individual companies. The incentives would be available for 29 categories of products, including telecom, information technology hardware, consumer electronics, medical electronics, automotive electronics, solar photovoltaic and semiconductor chips and chip components.

For example in an SEZ like Sriperambudur, a group of companies (SPV) setting up infrastructure with a cost of Rs 10 crore would have to spend Rs 5 crore from their pocket.

Similarly, a company setting up a facility for manufacturing handsets within that SEZ with a capital expenditure of Rs 10 lakh, would have to spend Rs 8 lakh. Other infrastructure such as road connectivity, water and power supplies would have already been taken care by the SPV.

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 M-SIPS would also provide reimbursement of countervailing duty or excise for capital equipment for the non-SEZ units. For high technology and high capital investment units – like fabs – reimbursement of Central taxes and duties would also be provided.

The scheme also provides incentives for relocation of units from abroad.

Industry hails move

“The support being envisaged for domestic manufacturers of electronics under the M-SIPS and EMC schemes will provide a much-needed helpline for domestic players,” Mr P.V.G. Menon, President, India Semiconductor Association, said.

He said the setting of specific threshold limits for individual product categories, and broad-basing of these categories, will also help bring much needed clarity and focus to the M-SIPS.

“This will not only create employment of 28 million people by 2020 for the whole industry, but also create opportunity to export,” Mr Rajoo Goel, Secretary General, Electronic Industries Association of India, said.

“At present, with about 85 per cent import content, this sector is badly affected by the depreciation of the rupee and hence the cost to the customer keeps on fluctuating. The increased manufacturing in India due to these schemes will see the prices being stable for the customers,” Mr Sabyasachi Patra, Executive Director, Manufacturers’ Association of Information Technology India, said.

(This article was published on July 12, 2012)
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