Government Okays Rs 25,000 Crore Push For Local Electronics Manufacturing: Report

The Finance Ministry has given its approval for a new incentive programme worth $3 billion (approximately Rs 25,000 crore) to boost domestic electronics component manufacturing. Government sources indicate the proposal is expected to receive Cabinet approval this month, with implementation scheduled for April, says a report by Economic Times (ET).

It is likely that the scheme could generate electronics component production valued between $50-60 billion during its five-to-six year duration.

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Focused Funding Approach

While initial discussions between the Ministry of Electronics and IT (MeitY) and the Finance Ministry contemplated a larger outlay of Rs 30,000-40,000 crore, the final figure was determined after careful analysis of industry investment potential, market requirements, and production capabilities, the report added. Officials note the possibility of increasing funding if the initial allocation proves successful.

Flexible Incentive Structure

Unlike existing smartphone production incentives that offer fixed rates of 4-6 per cent, this new programme will feature variable incentives based on specific products. The structure takes into account manufacturing challenges compared to competitors like China and Vietnam, with higher incentives for products facing greater production hurdles.

Investment-Heavy Focus

“In smartphones, the investments are small, but manufacturing is big. But to develop a component manufacturing ecosystem, large investments have to be made,” an official was quoted as saying.

Industry Seeks Customs Relief

As the scheme's launch approaches, electronics manufacturers are advocating for reduced customs duties on certain smartphone components. Industry representatives argue that simultaneous high duties and incentives could diminish the program's effectiveness.

The initiative aims to meet India's rapidly growing electronics component demands, projected to surge from $45.5 billion in 2023 to $240 billion by 2030, according to Confederation of Indian Industry research. Government officials target increasing local value addition from the current 15-18 per cent to 35-40 per cent during the scheme's tenure, ultimately aiming for 50 per cent of non-semiconductor materials.

Key Components in Focus

The scheme will include essential components including printed circuit boards, camera modules, display sub-assemblies, lithium-ion cells, speakers, vibrator motors, and mechanics. These elements constitute roughly 50 per cent of the materials cost in mobile phones and laptops.