Cabinet clears modified incentive scheme to boost electronics sector

The Cabinet on Wednesday approved amendments in the Modified Special Incentive Package Scheme (M-SIPS) to further incentivise investments in electronics sector and moving towards the goal of ‘Net Zero imports’ in electronics by 2020.

The Cabinet in July 2012 had approved the M-SIPS to provide a special incentive package to promote large scale manufacturing in the Electronic System Design and Manufacturing (ESDM) sector.

The scheme provides subsidy for capital expenditure of 20 per cent for investments in Special Economic Zones (SEZs) and 25 per cent in non-SEZs. The scheme was amended in August 2015 for scope enhancement and simplification of procedure.

The Scheme has attracted investments in the ESDM sector to the tune of ₹1,26,838 crore, of which investments of around ₹17,997 crore have been approved by the Ministry of Electronics and IT (MeitY).

Besides expediting investments into the ESDM sector in India, the amendments in M-SIPS are expected to create employment opportunities and reduce dependence on imports.

The projects already received under the scheme have the potential to generate employment to the extent of up to one million persons (direct and indirect).

As per the decision, the applications will be received up to December 31, 2018, or till such time that an incentive commitment of ₹10,000 crore is reached, whichever is earlier. In case the incentive commitment of ₹10,000 crore is reached, a review will be held to decide further financial commitments, Ravi Shankar Prasad, Minister of IT, said.

“A separate Committee headed by Cabinet Secretary and comprising CEO, NITI Aayog, Secretary Expenditure and Secretary, MeitY will be set up in respect of mega projects, envisaging more than ₹6,850 crore ($1 billion and above) investments,” Prasad said.

The policy covers all States and districts and provides them an opportunity to attract investments in electronics manufacturing. So far, 243 applications have been received under the scheme, out of which 75 applications have been approved involving investment proposals of ₹17,997 crore, Prasad said.

“There have been 42 mobile manufacturers and 30 electronic component manufacturers who have set up facilities in the last one-and-a-half years and there are one-lakh direct and two-lakh indirect employees in the electronics manufacturing sector. We expect $500 billion (₹35 lakh crore) investments in the next 5-10 years and would generate around three crore jobs,” Prasad added.

Meanwhile, some of the other salient features of the M-SIPS include approvals will normally be accorded to eligible applications within 120 days of submission of the complete application; The incentives will be available for investments made within five years from the date of approval of the project; and the incentive under the scheme will be available from the date of approval of a project and not from the date of receipt of application.

Also, a unit receiving incentives under the Scheme will provide an undertaking to remain in commercial production for a period of at least three years. According to various reports, the electronics manufacturing is important as otherwise, the import of electronics devices/ equipments bill may surpass the oil import bill of $400 billion (estimated) by 2020.