Tuesday, March 3, 2020

Incentives to make India a hub for manufacturing of electronics and components

In one of the biggest incentive schemes to boost domestic manufacturing of mobile phones and their components, the government has worked out a production-linked incentive (PLI) package of nearly Rs 42,000 crore for those making in India, planning to offer a benefit of 4-6% on incremental sales (of goods manufactured locally) for a period of five years.
[...]The electronics hardware manufacturing sector faces the lack of a level-playing field vis-à-vis competing nations… (and) suffers from a disability of 8.5% to 11% on account of lack of adequate infrastructure, domestic supply chain and logistics; high cost of finance; inadequate availability of quality power; limited design capabilities and focus on R&D by the industry; and inadequacies in skill development...
[...]The government plans to offer incentives under the scheme to large contract manufacturers (as defined in the FDI policy circular of 2017) on sale of phones above the invoice value of $200 (a little over Rs 14,000). Those to benefit will include global contract manufacturers such as Foxconn, Flex and Wistron, all of whom are making products in India. However, some companies such as Oppo, Vivo and even Samsung are not too happy as the incentive is for devices with ex-factory price of above $200, and the majority of phones sold by them are below this cost.
[...]The government wants to cut the ballooning bill of electronics imports. It hopes that incentives through the scheme will help create incremental production of Rs 8.2 lakh crore worth of mobile phones and their parts, generate exports of Rs 5.8 lakh crore, while creating 2 lakh fresh jobs and contributing Rs 4,782 crore to the exchequer through direct tax revenue.
[...]The total incentive planned to be given in the first year is around Rs 4,030 crore, in second Rs 6,395 crore, in third Rs 8,760 crore, in fourth Rs 11,790 crore and in fifth Rs 10,820 crore. “With the demand for electronics hardware expected to rise rapidly to approximately $400 billion (approximately Rs 26 lakh crore) by 2025, India cannot afford to bear the rapidly increasing foreign exchange outgo on account of electronics imports...