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Indian government announces incentive package for electronics manufacturing

New Delhi, July 14 2012: The Indian government has announced a special Rs 100 billion ( Rs 10,000 crores) incentive package to promote large-scale manufacturing in the Electronic System Design and Manufacturing (ESDM) sector. 
The scheme provides subsidy for investments in capital expenditure - 20% for investments within Special Economic Zoness and 25% in non-SEZs. It also provides for reimbursement of Countervailing duty or excise duty for capital equipment for the non-SEZ units. High technology and high capital investment units, like fabs, are also offered reimbursement of central taxes and duties.
Called the Modified Special Incentive Package Scheme (M-SIPS), the incentives are available for investments made in a project within a period of 10 years from the date of approval. They are available for 29 category of ESDM products including telecom, IT hardware, consumer electronics, medical electronics, automotive electronics, solar photovoltaic, LEDs, LCDs, strategic electronics, avionics, industrial electronics, nano-electronics, semiconductor chips and chip components, other electronic components and EMS.
Units across the value chain starting from raw materials including assembly, testing, packaging and accessories of these category of products are included. The scheme also provides incentives for relocation of units from abroad. The scheme is open for three years from notification.
Approvals for incentives up to Rs 100 billion will be granted during the XII Plan period.

An early industry comment came from Jaswinder S Ahuja, Corporate Vice President and MD, Cadence Design Systems and President, VLSI Society of India: “The cabinet’s approval of the Modified Special Incentive Package Scheme (MSIPS) for the electronics industry is a welcome initiative. It is a key step in addressing the huge gap – estimated at US$300 billion – between locally manufactured electronics and the consumer demand for electronics that we expect to see by 2020. The provision for reimbursement of central taxes and duties for setting up local fabs in future is a step in the right direction. It is also encouraging to note that a wide range of verticals can benefit from MSIPS, and also that MSIPS will provide incentives for relocation of units from abroad”.

He adds: “This announcement follows two other significant announcements related to supporting the local ESDM ecosystem – one in July 2012 on the setting up of electronics manufacturing clusters by the Government and the other in February 2012 on preferential market access to Indian electronics hardware companies. The only missing piece now is the setting up of an Electronics Development Fund, which will provide the impetus for the ESDM ecosystem to really take off”.