PLI scheme for Electronic Components Manufacturing finalised

Context: The Ministry of Electronics and Information Technology (MeitY) has finalised an ambitious incentive policy to boost domestic manufacturing of electronic components. 

With an outlay of approximately ₹23,000 crore spread over six years, the scheme aims to deepen value addition in the electronics sector.

Incentive Scheme for Electronic Components Manufacturing

• Target: 
  • To enhance domestic value addition in the electronics sector, which remains low at 15-20%. 
  • The government hopes to raise this to 30-40% by promoting domestic manufacturing of electronic components.
• Targeted components: The scheme will support the manufacturing of key electronic components such as:
  • Display modules
  • Camera sub-assemblies
  • Printed circuit board assemblies
  • Lithium cell enclosures
  • Resistors, capacitors, ferrites, and more
• Types of Incentives:
  • Operational Incentives: Based on net incremental sales, similar to the PLI scheme.
  • Capital Expenditure Incentives: Given on eligible capital expenditure to promote infrastructure investments. 
• Eligible entities:
  • Both greenfield and brownfield investments can avail subsidies.
  • Foreign companies can participate through technology transfer to Indian companies or through joint ventures with domestic firms.
• Employment Generation:
  • The initiative aims to create 91,600 direct jobs over six years. 
  • Annual incentive payouts will range from ₹2,300 crore to ₹4,200 crore, conditional on companies meeting investment, production, and employment targets. 

Electronic Components Manufacturing Sector in India

• Market size: Valued at $101 billion in March 2023. The sector aims to reach $300 billion by 2025-26. 
  • Production Linked Incentives (PLI) schemes have boosted production and attracted major global players like Apple and Samsung. 
  • Exports of electronic goods rose by 23.6% in FY 2023–24 to $29.12 billion.
  • Key Initiatives:
    • MeitY: Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS) and the Modified Electronics Manufacturing Clusters (EMC 2.0) scheme. These schemes focus on infrastructure and investment in high-value components.
    • National Policy on Electronics 2019, along with Make in India and Digital India to support domestic manufacturing, job creation, and technological growth. 
    • Investments in R&D and manufacturing clusters further enhance the sector’s expansion.

Challenges in India’s Electronics Manufacturing

• Low Domestic Value Addition: Despite success in localising smartphone assembly, value addition remains around 15-20%, with the aim to increase it to 40%.
• Demand-Supply Gap:
  • Domestic demand is estimated to be $100 billion, while the country’s production capacity is only $10.75 billion. 
  • The demand for components is expected to reach $160 billion by 2028-29, with imports growing at 12% annually.
• Investment to Turnover Ratio: For smartphones, every ₹1 of investment yields ₹20 in turnover; whereas for electronic components, it yields only ₹2-4.
• Heavy dependence on Imports: Electronics imports constitute nearly 75% of the total electronics production in India, making the country heavily dependent on foreign suppliers for critical components like integrated circuits.