Extend PLI to all electronics manufacturing, says industry

Venkatesh Ganesh Mumbai | Updated on April 29, 2020

Electronics and semiconductor companies want the government to extend performance linked incentives (PLIs) to include all types of manufacturing.

On April 1, the government came up with a ₹41,000-crore PLI scheme, the contours of which are applicable to domestic mobile phone manufacturing.

The scheme involves providing incentives in the range of 4- 6 per cent on incremental sales of goods manufactured in India and covered under target segments, for five years from the base year. Till date, most electronics manufacturing is confined to assembling with very low value addition and PLI is a way to attract large investments in the electronics value chain, including electronic components and semiconductor packaging.

“Currently, PLI benefits are applicable to mobile phone manufacturing. Instead, it should be applicable to all electronics products, wherein even higher value addition can be achieved,” said Satya Gupta, Chairman, India Electronics and Semiconductor Association and founder & CEO, Seedeyas Innovations.

Growing demand

The numbers are staggering. The total demand for electronics products, services and components for both domestic and export market is expected to grow to $540 billion by 2025, out of which $368 billion will be for electronics products. Of this, less than half or 44 per cent will be mobile phones. This means demand in excess of $200 billion will be from non-mobile phone segments. These numbers are pre-Covid estimates.

“Consumer electronics including TV, other terminal devices, industrial electronics, emerging sectors like 5G, EVs, and medical electronics have equal or bigger opportunity for growth when compared to mobile phone manufacturing,” said Gupta.

In the post Covid-19 era, countries are actively seeking to move their manufacturing away from China. The break in the global supply chain gives an opportunity for India to target import substitution, and widening the PLIs helps, stated Abhishek Gupta, Partner, Government and Transaction Advisory, EY India.

Specifically, the industry believes that manufacturing electronic components locally and including that in the PLI would be a game-changer. “Components should be made in India and should be qualified as value addition,” said Vinod Sharma, Chairman, CII national ICTE (electronics ) committee, Past President, ELCINA, and MD, Deki Electronics.

Manufacturing gap

The issue assumes significance as there is a lack of electronic components manufacturing, near absence of semiconductor manufacturing and absence of display manufacturing ecosystem in the country. It is in this backdrop that component makers are nursing a grouse against the government as they feel that the PLI benefits only companies with deep pockets such as Foxconn.

“A framework that is product-agnostic will see India emerge as a leader in multiple product categories, including those where much higher levels of value addition can be achieved,” said Nitin Kunkolienker, President, MAIT.

Meanwhile, with the Covid-19 outbreak, smaller manufacturers seek government help in the form of tax relief. In a difficult year, measures such deferment in TDS for employees and reduction of corporate tax to 5 per cent (from 25 per cent) would help small companies, stated Parag Naik, CEO & co-founder, Saankhya Labs, a company that designs fabless semiconductor and communication systems.

Published on April 29, 2020

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