India’s Rs 22,919 Crore Initiative: Transforming Companies from Assemblers to Innovators
In a significant step towards establishing India as a global hub for electronics manufacturing, the Union Cabinet has approved a Production-Linked Incentive (PLI) scheme valued at ₹22,919 crore. This initiative aims to bolster the production of essential electronic components, including sub-assemblies and foundational parts, while addressing India’s heavy reliance on imports. The scheme is designed to enhance domestic manufacturing capabilities and align with the government’s broader vision of self-reliance under the Atmanirbhar Bharat initiative.
Targeting Key Segments
The newly approved PLI scheme focuses on critical segments of the electronics supply chain, such as Printed Circuit Boards (PCBs), SMD passives, and Li-ion cells. By targeting these areas, the initiative seeks to reduce India’s dependency on foreign imports, particularly from countries like China. The scheme not only supports the development of components but also extends its benefits to capital equipment and subassemblies used in manufacturing. This comprehensive approach aims to create a more integrated and efficient production system, ultimately enhancing India’s competitiveness in the global electronics market.
The government’s strategy includes previous initiatives like the PLI for Large Scale Electronics Manufacturing and the Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors. However, the component ecosystem has remained a gap that this new PLI scheme specifically addresses. By providing structured incentives linked to turnover, capital expenditure, and quality benchmarks, the scheme encourages manufacturers to meet high standards, thereby promoting indigenous innovation and reducing reliance on assembly operations.
Incentives and Compliance
What distinguishes this PLI scheme is its structured incentive model, which emphasizes performance and compliance. Manufacturers will be required to meet specific design and quality benchmarks, including Six Sigma standards, to qualify for incentives. This focus on quality reflects the government’s commitment to fostering a design-led manufacturing environment rather than merely serving as an assembly base.
The scheme also adopts a first-come, first-served approach for incentive allocation, ensuring a competitive yet fair environment for industry players. Applicants must meet prescribed thresholds related to their consolidated global revenue in the Electronics System Design and Manufacturing (ESDM) sector for the fiscal year 2023-24. Additionally, there is a cap of 50% on the incentives payable on eligible investments, ensuring judicious use of public resources.
A notable feature of the scheme is the mandatory criteria for specific segments, such as Display and Camera sub-assemblies. Only applicants who can demonstrate a complete sub-assembly process will be eligible for incentives. Furthermore, localization criteria will play a crucial role in determining continued eligibility for incentives, promoting domestic production and reducing external dependencies.
Encouraging Foreign Participation
The scheme also allows for joint ventures with foreign companies, a progressive move aimed at attracting advanced technology and investment into India’s electronics sector. This collaboration is essential for developing high-tech components, such as substrates and semiconductor packaging, which require significant investment in infrastructure and expertise. By facilitating foreign technology infusion, the initiative aims to enhance domestic capabilities and workforce skills.
Moreover, the government has made provisions for applicants previously approved under the Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors but unable to avail incentives due to budget constraints. This continuity in policy reinforces the government’s long-term commitment to building a robust industrial ecosystem, thereby boosting industry confidence.
Impact on the Electronics Ecosystem
India’s electronics manufacturing sector has made notable progress, yet a substantial portion of components is still imported. The new PLI scheme is expected to attract over ₹59,000 crore in investment and generate a production potential of ₹4.56 lakh crore over the next six years. This initiative aims to correct the import imbalance by enhancing domestic value addition and reducing vulnerabilities in the supply chain.
As global supply chains undergo realignments due to geopolitical tensions and tariff wars, India has the opportunity to position itself as a comprehensive electronics manufacturing destination. By focusing on foundational components and setting rigorous quality and localization benchmarks, the country aims to emerge as a credible supplier in the global market. The scheme is projected to create approximately 91,600 direct jobs, laying the groundwork for India to ascend the global manufacturing value chain and become an innovation engine in the electronics sector.
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