Budget 2020: Finance Minister Nirmala Sitharaman Proposes New Electronics Manufacturing Scheme

Finance Minister Nirmala Sitharaman on Saturday said a scheme on encourage manufacturing of mobile phones, semiconductor packaging and electronic equipment is on the anvil. Making the announcement in the Budget speech, she said: "There is a cost advantage for electronics manufacturing in India".

But she says that this needs more investment. "I propose a scheme to encourage manufacturing of mobile phones, semiconductor packaging and electronic equipment", she said, adding this can be used for manufacture of medical devices as well.

A detailed scheme with details will be released soon, the FM said.

A Modified Special Incentive Package Scheme (MSIPS) to promote aggressively a 20-odd component manufacturing ecosystem in the country that will go beyond making mobile phones could be on the anvil. This could be an overarching policy that goes beyond interest subvention and credit default guarantee and it will be outside the scope of MeitY (Ministry of Electronics and Information Technology) and by an outside department/arm since ministry's role is that of a policymaker only.

M-SIPS was first floated to encourage electronics manufacturing and it ran from 2012 to 2018. It promised multiple incentives for 10 years, including a capital subsidy of 20 percent in special economic zones (SEZs) and 25 percent in non-SEZs, and reimbursements of countervailing duty or excise on capital equipment for non-SEZ units.

For some high-capital projects, it also offered reimbursement of Central taxes and duties. The incentives were available for 29 electronic verticals across the manufacturing value chain. The period of benefits was reduced to 5 years from 10 years after it was recalled.

M-SIPS was created to provide financial incentives across the ESDM (Electronics System Design and Manufacturing) value chain to compensate for cost disability in manufacturing and Electronics Manufacturing Clusters (EMC).

This sector has shown tremendous promise wherein exports have grown from a mere US $200 million three years ago to over $2 billion in the year 2019-20 in handsets alone -- a 10x growth in 36 months.

One of the most successful stories around Make in India is mobile handset manufacturing with Noida outside Delhi becoming the new hub. The size of the domestic mobile manufacturing industry in FY 2019-20 is expected to be Rs. 1,35,000 crores as against Rs. 94,000 in FY 2016-17.

Already, India, which has second position in the global mobile handsets market, is projected to grow to 302 million units this year.