The Government is considering a new special incentive package scheme to boost production of electronics in the country, Dr Ajay Kumar, Joint Secretary, Department of Information Technology, said on Monday.

Speaking here at the ISA Vision Summit 2011, a conference organised by the Indian Semiconductor Association, Dr Kumar said the scheme would “address the deficiencies of the earlier scheme” announced in 2007 but maintain its “attractive financial support”. Dr Kumar admitted that the earlier scheme, which was designed to attract investments in semiconductor fab facilities and the attendant eco-system and open for three years till March 2010, received “lukewarm response”. The scheme, which offered grants and incentives to companies that invested Rs 2,500 crore in fab units and Rs 1,000 crore in the ‘eco-system', however, provided “valuable learnings”, Dr Kumar said.

Lessons from old scheme

The biggest learning was why the investment threshold was a hurdle, as it prevented potential manufacturers of chip components, discrete components and electromechanical parts and accessories from taking advantage of the scheme. Besides, since the scheme was open for three years, units applying for incentives under the scheme had to wait for three years before they knew whether or not they would be eligible for Government support.

“There was a need to inform the units about their eligibility for incentives on an ongoing basis,” Dr Kumar said.

The new scheme under consideration would address these issues, he said, but expressed regret that he could not elaborate further on the new scheme. “We are striving to get necessary Government approvals for the scheme at the earliest,” he said.

The scheme in the offing is the result of the work of a task force constituted in 2009, one of whose recommendations is also to set up an electronics development fund to promote research and development. The Department of IT is in the process of conceptualising it. There is a need for grant for basic research, and venture capital support for subsequent prototyping and commercialisation, Dr Kumar observed, adding that the Government “needs to step in with suitable incentives to support research effort”.

Quoting from the task force report, Dr Kumar noted that the demand for electronics hardware in India would go up from $45 billion in 2009 to $400 billion by 2020, but at the current growth rate, the domestic industry would be able to cater to demand worth $ 104 billion — the rest would need to be imported. The Indian electronics manufacturing sector in India suffers from a confidence deficit, Dr Kumar said.

Nano-opportunities

Delivering the inaugural address at the summit, Dr N. Seshagiri, former Special Secretary, Department of IT, and Founder-Director General of National Informatics Centre, Government of India, stressed on the need for the industry to get into nanotechnology. Dr Seshagiri pointed out that last year the industry worldwide recorded more than $20 billion in nano-materials, -tools and -devices. By 2013, these nano-enabled products will be worth around $1.6 trillion. “The question before us today is what we should do in the nano-systems market, especially in electronics and IT hardware?”

Dr Seshagiri also pointed to the huge opportunity for India to take up outsourcing jobs in nano-related research. He said while capital investments in producing nano-based products will be only about $2 billion, investments in research will be as much as eight times of that. Competitive research and development is a big cost in the West. The Government of India should assist the industry to outsource research as much as possible, because the western countries like Japan are definitely going to do so in order to cut costs.

In this context, he made a plea for beefing up India's patent laws. “The patent laws of India are not bad, but is not as good as something like nanotechnology R&D would require,” he said. Many companies in the US are interested in outsourcing their R&D to India, provided they have security, he said.

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