Indian-Chinese JVs may be eligible for ₹40,000cr electronics component scheme
What's the story
The Ministry of Electronics and Information Technology (MeitY) is finalizing a cabinet note for the electronics component-manufacturing scheme, estimated to cost around ₹40,000 crore. The note should be presented by mid-December. As per Moneycontrol, most agreements are in place and only minor adjustments on expenditure are pending. The government may announce the subsidy scheme by early-January. For the policy, blanket approvals for Chinese firms are out of question, but joint ventures (JVs) with Indian companies may be considered.
JV prospects
Government's stance on Chinese firms shifting
Industry sources indicate a possible change in the government's approach toward Chinese companies. However, permission for JVs will be given, as long as there are enough checks and balances. "This is an inter-ministerial issue led by the Ministry of Home Affairs (MHA). There has been a recent positive change in perspective, recognizing the need for deeper value addition," a second industry source told Moneycontrol.
Policy focus
It will emphasize operational subsidies
The forthcoming policy is likely to focus on operational subsidies, in line with the finance ministry's inclination toward production-linked incentive (PLI) schemes linked to certain achievements. MeitY recently discussed capital and operational subsidies across component categories with industry stakeholders. The new policy will replace the ₹3,285 crore Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS), which concluded March 31.
Growth targets
New policy aims to boost domestic value addition
The new policy seeks to raise domestic value addition in electronics components from 15-18% to 35-40% initially, aiming for 50% over time. The India Cellular & Electronics Association (ICEA) and the Electronic Industries Association Of India (ELCINA), in their submission to MeitY earlier this year, suggested a ₹40,000-45,000 crore outlay for the scheme, stressing on capital expenditure support. They said the scheme is essential to meet the growing demand for electronic components.
Scheme merger
Smartphone PLI scheme to be merged with new components scheme
The government also intends to phase out the PLI scheme for smartphones by merging it with the new components proposal. The smartphone PLI, which is the most successful of all 14 such schemes, might be extended by a few years beyond 2025-26 when it officially ends. "Another PLI for smartphones won't come; it will be subsumed into this one," an official added.