The Government has started receiving a number of proposals under the Modified Special Incentive Package scheme (M-SIPS) of the ‘Make In India’ programme. Abhishek Raval speaks to S.K. Marwaha, Director / Scientist ‘F’, GoI, Min of Communications and IT Dept. of Electronics and IT
Steps taken by the GoI to speed up the ‘Make in India’ programme
While the UPA regime had initiated efforts to promote electronics manufacturing in India, the NDA government has put a renewed thrust on Make In India.
The unsustainable foreign exchange outgo to fund the electronics imports and India being a signatory to the WTO’s IT agreement that binds for zero customs duty are two major challenges before the government.
The best method to overcome these disabilities is to provide a capital incentive in the form of capital subsidy via the Modified Special Incentive Package scheme (M-SIPS). It applies to the unit set up in the domestic tariff area. We provide 25% subsidy. It means the government bears 25% of the project cost. If the unit is in a SEZ, there are several other benefits like IT benefits that provides for 20% capital subsidy.
We are also giving export incentive of 2% of the Free On Board (FOB) of the exports. To realise the vision to set up world class Infrastructure in India, we need to have clusters, where the suppliers can be co-located. For e.g. In Shenzhen, China, the suppliers are co-located. The idea of co-locating the suppliers in clusters gives a cost advantage of 8-10%. The government has recognized this need and promoted these clusters, both greenfield and brownfield.
For greenfield clusters, the government can provide a grant of upto 50% of the project cost limited to 50 crores per 100 acres. So, for every 100 acres the company gets 50 cr grant from the government for creation of Infrastructure suited to electronics. For brownfield clusters with existing electronics related units and if they want to set up common facilities for e.g. A tool room or testing facilities, the government funds upto the extent of 75%. These are indirect ways of helping the industry to cut down their costs.
How has been the response to these initiatives by the government?
The response to M-SIPS is excellent. We have received a number of proposals. They are getting approved. For a few of these units, the reimbursement has also started, which is in the form of reimbursement after the manufacturer has made the investment. The amount is 25% of the project cost. This incentive is for a period of ten years.
Roughly twenty applications have come from companies, where there is foreign equity and about forty applications are from Indian companies. They have shown interest to leverage the M-SIPS. They are across various verticals of electronics.
Taiwanese companies like Foxconn, MediaTeK Inc., Inventec etc. have shown interest. They are looking at India as an alternate destination to mainland China.
Now we want to operationalise the Electronics Development Fund (EDF). We are coming up with an awards scheme to encourage the Industry. The different sectors will be awarded on the basis of excellence achieved in electronics. We are also working on a fabless policy. India has a good fabless Industry ecosystem in place. Under the scheme for mandatory registration for safety standards, we have notified 15 more products. Now we have expanded it 30 products.
The objective of the Electronics Development Fund (EDF) is to encourage the much needed innovation, research and development activities in the country in the electronics and IT manufacturing.
A huge amount of Indian talent is working for foreign companies. They are employing Indian talent however the Intellectual Property Rights (IPR) is owned by them. The Indian government wants to encourage Indian talent to work for Indian companies.
Moreover, India also has a thriving start up eco-system. Today’s youth is moving away from conventional jobs. They want to start up their own companies and ventures.
The government’s EDF policy aims to make the Indian talent work for Indian companies. We want to support them by providing the required fund. How do we do it? We will set up a series of daughter funds targeted at different areas of electronics. The funds will go to new age entrepreneurs wanting to design new products, solutions. The objective is to encourage development of emerging entrepreneurs who want to develop technologies, do cutting edge innovation work in India.
The fund managers will shortlist start ups, who will qualify for funding based on the set criteria.
A similar idea has been very successful in Israel in the form of Yozma fund.
The preferential market access (PMA) scheme has a lot of potential to boost local manufacturing in India by Indian manufacturers.
Under the PMA, the government is giving preference to domestically manufactured electronic products. The products will be defined as ‘domestically manufactured’ if they meet a minimum value addition that is specified as 25% for the first year, going up 5 % every year.
The value addition is computed on the basis of the Bill of Material (BoM). In case you meet that value addition, then your product is classified as domestically manufactured and in government procurement- for the 9 electronic products that we have notified- half the government order goes to the domestic manufacturer in case they match L1 price. L1 may be an importer but then as a manufacturer, they are given an opportunity to match L1. If they match L1, they are qualified to supply at L1 price and get half the order. In case, by chance they are L1 qualified them to bag 100% of the order.