Analysis: EMC 2.0 Scheme of MIETY

Reading time: 8-10 minutes.

Since the advent of the 21st century, India has grown from heights to heights to reach the stature of a rapidly growing digital and electronic hub. Having said this, indigenous production of electronics or any other product for that matter of fact has always been a matter of concern for India. Various initiatives such as the Make in India Campaign and Atma Nirbhar Bharat are aimed at addressing this issue and induce the much-needed paradigm shift. Moving to the Electronics sector, again, India continues have its woes when it comes to indigenous production, though it boasts of a booming demand run market.

Time and again, the lack of sophisticated infrastructure has been identified as the key deterrent, in this regard. Back in 2012, the then Government launched the Electronic Manufacturing Clusters (EMC) Scheme 1.0 in October, 2012 in an attempt to address this issue. The scheme was henceforth taken forward efficiently by the current government and before it ended in 2017. The current Electronic Manufacturing Clusters Scheme (EMC 2.0) has been launched by the Ministry of Electronics and Information Technology (MeitY) on the 1st of April , 2020 and has subsequently been notified in the Gazette of India.

Significance

Apart from intrinsic significance, generally too, the scheme is indeed a significant one, considering the fact that with COVID-19 still making the headlines, the government has decided to act proactively to secure a safehold by building new ventures and partnerships. The subsequent investments from this scheme and two other schemes in the project is expected to generate around 5 lakh direct and 15 lakh indirect jobs. This being said, the scheme will also push the vocal for local cause, besides contributing to the growth of Digital Economy. With the mobile phone manufacturing sector experiencing a huge boom in India, the next call has been for developing the electronic components industry. Global mobile giants like Apple have been eyeing at setting up Indian units after considerable spike in sales, a 78% increase, following the launch of iPhone 11, according to a Financial Express report. The first step at inviting market leaders into India would be setting up self-reliant, electronic unit manufacturing capacities in India that meets the indigenous demand and this scheme has the same as its aim.

Objectives and Purposes

The scheme has its tagline or one liner objective at providing financial assistance for setting up electronic projects and instalments in the Indian soil. The scheme has its lifetime set at 3+5 years, i.e. the scheme will be open for application for a period of 3 years following which it would be taken down and the approved projects would be allocated their respective funding through a period of 5 years. For the same, a dedicated application portal has been launched by the MeitY. Also, the gazette notification has been issued in around eight foreign languages to facilitate foreign multinationals to avail the benefits.

Salient features of the Scheme

The scheme is allocated with a budget of 3,762.25 crores. The same will be used for setting up Electronics Manufacturing Clusters and Common Facility Centers all over India. Thus, the aim is two-fold, to set up new projects and also develop the infrastructure pertaining to the existing facilities. The financial assistance would be 50% of the project cost, which would come with a cap placed at ₹ 70 crores for every 100 acres of land. However, the  assistance will not exceed the upper limit placed at ₹ 350 core, which is inclusive of the larger project areas too. The remaining 50% cost would be borne by the state entities, which might be the State Government, the implementation units, industrial corridor development authorities or the public sector units, depending on the framework in the respective states. For the development of existing facilities, the centre will bear 75% of the total costs and the state will bear 25% through its respective state implementation authorities.

For an initial period of four years, an autonomous Society set up by the MeitY, under the name, “Software Technology Parks of India”, will be the Project Management Agency. As far as applications for the scheme are concerned, a Project Review Committee will examine the applications, subsequent to which funds will be granted by the Ministry of Electronics and Information Technology. The fund allocation will be three-phased. It will follow a (30+40+30)% pattern, wherein, the first instalment is granted on the approval, second instalment on allocation of lands to the unit, infrastructure development and the third instalment on completion of the project. Furthermore, the scheme proposes for an illustrative, non-exhaustive list of activities that will come under its funding ambit. This includes Manufacturing Support, essential services, among many others.

Other Schemes

This scheme comes as a part of a whopping 50,000 crores project launched by the Ministry of Electronics and Information Technology. The other schemes include Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS) with a budget of Rs 3,285 crore and Production Linked Incentive Scheme (PLI) with a budget of around Rs 40,951 crores.

Critical Analysis

Analysing the EMC 2.0, the scheme in tandem with the others is expected to invite a lot of global multinationals to invest in India. Several features of the Scheme, such as keeping the potential funding list open has been received well by Sector. The idea of incentivising development projects in existing tech parks is expected to provide the much-needed alliance between electronic unit manufacturers and whole component makers. This would further boost India’s intentions to create a sustainable electronic ecosystem, where demand for electronic components pertaining to whole units (such as mobile industries) are also indigenously met and the transaction costs are significantly cut down, in the process. As stated earlier, this will come as a welcome move as far as the Make in India and the relatively new Atma Nirbhar Bharat initiatives are concerned.

Conclusion

On an endnote, the magnitude of COVID-19 has been unprecedented and has brought global supply chains to a stop. China too has been hard hit in this regard. Even though China seems to have flattened the curve and productions seemed to have resumed, China has lost a huge chunk of its competitive advantage in every other sector. The electronics sector is not an exception too. Also, there seems to be a growing atmosphere of distrust amongst the international community towards China. It is at this crucial juncture; the centre has come out with schemes such as Modified Electronics Manufacturing Clusters (EMC 2.0) Scheme. The potential success of the scheme could well change the geographies of global electronics and could potentially push India to the status of an ‘Global Electronic Hub’. With schemes like these promising a lot in fine print, it eventually boils down to one word, implementation.

Author: Pascal Sasil R. from CHRIST (Deemed To Be University), Bangalore.

Editor: Silky Mittal, Junior Editor, Lexlife India

Analysis: Production Linked Incentive Scheme of MIETY

Reading time: 8-10 minutes.

The Ministry of Electronics and Information Technology (MeitY), previously known as the ‘Department of Information Technology’ was earlier a part of the Ministry of Communications and Information Technology. It became an independent body of the Union Government in 2016. Its duties mainly involve matters in IT policy making and development of the electronics industry. The MeitY was working to launch schemes in order to fuel those electronic based companies which will make India a global exporter of electronics goods in the coming future. The production of mobile handsets increased massively over the course of a few years due to the continuous growth of technology, this resulted in the high number of exports. India produced 1.3% of the global share in production of electronics in 2012, which went up to 3% in 2018 in the matter of just 6 years.

The Production Linked Incentive Scheme (PLI) is among the three incentive schemes recently announced by the government to spur the electronics industry. Out of the Rs. 48,000 crores budget of the three schemes, the PLI is notified to have the maximum budget worth Rs. 40,000 crores.

Significance of the Scheme

The government launched the PLI scheme chiefly to act as a push for domestic manufacturing of mobile phones and specified electronic components such as Printed Circuit Boards (PCB), photopolymer films and Assembly, Testing, Marking and Packaging (ATMP) units. It mainly focuses on large scale manufacture. It is also so important because, it will further attract more investment increasing export and hence is a plan for the future.

Salient features

Ravi Shankar Prasad, the Union Minister announced the guidelines of the three schemes released by the government aiming to boost the electronics sector in India. It focusses to attract top five global and five domestic companies in India to be chosen after a screening process.

The target segment includes mobile phones and specified electronic components like SMT Components, Discrete semiconductor devices, Passive components, Printed Circuit Boards (PCB), Sensors, transducers, actuators, crystals, System in package, Micro/Nano-electronic components and Assembly, Testing, Marking and Packaging (ATMP) units.

According to the PLI scheme, an incentive is given on mobile phones and other electronic components as a manufacturing push. The scheme will start its applicability from the 1st of April 2020 for an initial period of four months. However, the tenure extends for 5 years subsequent to the base year (the base year being 2019-20). Under the scheme, the companies shall be applicable to benefits from 1st August, 2020.

Incentive of 6%, 5% and 4% in the first two years, the next two years and the fifth year respectively will be given to all companies eligible under the scheme registered in India.  

Where the company is required to manufacture phones worth Rs. 15,000 and above and make an investment of Rs. 1000 crores over the course of four years with an investment of Rs. 250 crores in the first year alone. The incremental sale over the five years being Rs. 25,000 crores.

However, in case of a domestic company, the minimum investment to be made is only Rs. 200 crores over the four years with Rs. 50 crores in the first year. The incremental sale over the five years being Rs. 5000 crores.

For other specified Electronic components, the minimum investment over the four years is required to be Rs. 100 crores with the incremental sale being Rs. 600 crores.

Objectives of the Scheme

  • The main objective behind the launch of the PLI Scheme is to spur the local handset production in the electronics industry of India as a part of the ‘Atma Nirbhar’ principle emphasized by Prime Minister Narendra Modi, making India a world class exporter of electronics goods.
  • This scheme, by and large, is expected to increase foreign investments and hence make India a self-sufficient nation. It seeks to be a plan for the future strengthening electronics sector of India and creating new job opportunities. The scheme, therefore, aims at India’s growth and development and make India a leader in the global market.

Legal aspect

A Nodal Agency shall be responsible for the execution of the scheme and hence act as a Project Management Agency (PMA) in disguise. It is required to receive its first application before 31st July 2020. All duties prescribed by the MeitY shall be duly performed by the agency which includes any managerial or implementation work like assessment of applications, authentication of claims of eligibility and verification, from time to time, of the performance of the company.

The new scheme requires a strong supervision for its governance; hence, an Empowered Committee is intended to be created consisting of CEO NITI Aayog, Secretary Economic Affairs, Secretary Expenditure, Secretary MeitY, Secretary Revenue, Secretary DPIIT and DGFT. Further, the Empowered Committee is responsible to review new eligible applications under the Nodal agency for approval and also oversee the periodic review of the companies on matters involving investment, generation of employment, production and value addition under the Scheme. Its other duties include revision of incentive rates, target segments and any change to be brought in the eligibility criteria of the scheme.

Critical Analysis

The idea of the PLI Scheme was welcomed with open arms by the Manufacturers Association for Information Technology, popularly known as MAIT. The President-MAIT talked positively of the scheme and also suggested that this scheme be extended to other electronics. In this crucial time when the country in under lockdown and the industry is facing a standstill, this step can act as a boon shooting the electronics industry in India to great heights.

Conclusion

The PLI Scheme is considered a necessary encouragement to spur the electronics industry in India and in making India a global manufacturer and exporter in electronics. As per the reports, the Covid-19 lockdown in China has led to discrepancies in supply of electronics goods. India is perceived to be an alternative for companies to invest due to India’s large market. This is seen as an opportunity by the Union government. Hence, the scheme brings with itself many responsibilities and expectations.

Author: Deepak Purohit from Sangam University.

Editor: Silky Mittal, Junior Editor, Lexlife India