India will offer financial incentives and other ready-to-use facilities as part of a strategy to make the country a global manufacturing base for mobile phones and their parts.
The plan, which has an outlay of about ₹50,000 crore, will initially aim to attract five global suppliers as well as five domestic companies.
Of this, the biggest chunk of about ₹40,000 crore will be offered as production-linked cash incentives of 4-6% on incremental sales of mobile phones and related parts made in India for a period of five years, with 2019-20 as the base year, according to the ministry of electronics and information technology (MeitY).
The government will also reimburse 25% of capital expenditure for companies producing electronic parts, semiconductors and other components under the Scheme for Promotion of Manufacturing of Components and Semiconductors (SPECS).
This is aimed at promoting local manufacturing of components and reduction in imports of electronic parts, which the industry currently has to do to assemble products. Separately, electronic manufacturing clusters with ready-to-use facilities will be offered to companies.
Addressing reporters, Ravi Shankar Prasad, minister for electronics and information technology, said the government’s decision can potentially turn India into a global hub for mobile phone production and make it the largest exported item out of the country, while generating half a million jobs.
The schemes were approved by the Union cabinet in March, and companies can start applying for them from Tuesday.
The steps underscore efforts by Asia’s third-largest economy to lure global corporations seeking to diversify their production bases beyond China amid a trade war with the US and large-scale disruptions to supply chains from the coronavirus outbreak.
The Modi administration hopes that these steps would help lift the fortunes of the economy that is headed for a contraction this fiscal year due to the pandemic and an extended lockdown.
“The PLI (production-linked incentive) instituted on mobile phones is indeed the first ever scheme announced by the government in the post-independence period, whereby, similar PLI is extended for both domestic Indian champions and global supply,” said Pankaj Mohindroo, chairman, India Cellular and Electronics Association.
Under the modified electronics manufacturing cluster scheme (EMC 2.0), infrastructure support such as ready built factory sheds and plug-and-play facilities will be offered.
This is aimed at not only attracting global mobile phone makers but also their supply chains.
The production of mobile handsets in 2018-19 reached 290 million units worth ₹1.7 trillion from 60 million units in 2014 worth ₹19,000 crore, according to data from the minister for electronics and information technology. India’s share in the global electronics market grew to 3% in 2018 from 1.3% in 2012.
“At the moment, the electronics industry is one of the fastest growing sectors; it’s expected to reach $400 billion by 2025 with potential import opportunity of $150 billion, which can be leveraged locally,” said Manish Sharma, president and chief executive of Panasonic India.
The SPECS scheme will help “overcome disabilities of manufacturing electronic components in India”, said Muralikrishnan B., chief operating officer of Xiaomi India.
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